UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934
Filed by
the Registrant x
Filed by
a Party other than the Registrant o
Check the
appropriate box:
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Preliminary Proxy
Statement
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Confidential, for Use of the
Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive Proxy
Statement
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Definitive Additional
Materials
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Soliciting Material Pursuant to
§240.14a-12
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Lincoln
Educational Services Corporation
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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x
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No fee
required.
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¨
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Fee computed on table below per
Exchange Act Rules 14a-6(i)(1)
and 0-11.
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(1)
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Title of each class of securities
to which transaction
applies:
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(2)
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Aggregate number of securities to
which transaction
applies:
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(3)
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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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(4)
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Proposed maximum aggregate value
of transaction:
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(5)
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Total fee
paid:
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¨
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Fee paid previously with
preliminary materials.
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¨
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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.
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(1)
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Amount Previously
Paid:
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(2)
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Form, Schedule or Registration
Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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200
Executive Drive, Suite 340
West
Orange, New Jersey 07052
March 27,
2009
Dear
Shareholder:
You are
invited to attend the 2009 Annual Meeting of Shareholders of Lincoln Educational
Services Corporation to be held on April 30, 2009, at the Wilshire Grand Hotel,
350 Pleasant Valley Way, West Orange, New Jersey 07052, at 10:00 a.m. local
time.
At this
year’s meeting, you will be asked to elect 10 directors, to vote upon a proposal
to amend the Company’s 2005 Non-Employee Directors Restricted Stock Plan to
increase the number of available shares thereunder, and to ratify the
appointment of Deloitte & Touche LLP as our independent registered public
accounting firm for our fiscal year ending December 31, 2009. The
accompanying Notice of Meeting and Proxy Statement describe these matters. We
urge you to read this information carefully.
Our board
of directors unanimously believes that the election of the nominees for
directors, the amendment of the Company’s 2005 Non-Employee Directors Restricted
Stock Plan and the ratification of the selection of independent registered
public accounting firm are in the best interests of the company and its
shareholders and, accordingly, recommends a vote FOR the election of the
nominees for directors, FOR the amendment of the Company’s 2005 Non-Employee
Directors Restricted Stock Plan and FOR the ratification of the selection of
Deloitte & Touche LLP as our independent registered public accounting
firm.
In
addition to the formal business to be transacted, management will report on the
progress of our business and respond to comments and questions of general
interest to shareholders.
We
sincerely hope that you will be able to attend and participate in the meeting.
Whether or not you plan to come to the meeting, it is important that your shares
be represented and voted. You may vote your shares by completing the
accompanying proxy card or giving your proxy authorization via the Internet.
Please read the instructions accompanying the proxy card for details on giving
your proxy authorization via the Internet.
IMPORTANT
NOTICE REGARDING THE AVAILABILITY OF
PROXY MATERIALS FOR OUR ANNUAL
MEETING
Our
proxy statement and our 2008 annual report to stockholders are available
at
http://www.lincolneducationalservices.com/proxy
YOUR VOTE IS
IMPORTANT!
Please
vote as promptly as possible by using the Internet or
by
signing, dating and returning the proxy card
mailed to
those who receive paper copies of this proxy statement.
BY
COMPLETING AND RETURNING THE ACCOMPANYING PROXY CARD OR BY GIVING YOUR PROXY
AUTHORIZATION VIA THE INTERNET, YOU AUTHORIZE MANAGEMENT TO REPRESENT YOU AND
VOTE YOUR SHARES ACCORDING TO YOUR INSTRUCTIONS. SUBMITTING YOUR PROXY NOW WILL
NOT PREVENT YOU FROM VOTING IN PERSON AT THE ANNUAL MEETING, BUT WILL ASSURE
THAT YOUR VOTE IS COUNTED IF YOUR PLANS CHANGE AND YOU ARE UNABLE TO
ATTEND. TO ENSURE THAT YOUR VOTE WILL BE COUNTED, PLEASE CAST YOUR
VOTE BEFORE 5:00 P.M. (EASTERN TIME) ON APRIL 29, 2009.
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Sincerely,
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/s/
David F. Carney
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David
F. Carney
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Chairman
and CEO
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LINCOLN
EDUCATIONAL SERVICES CORPORATION
200
Executive Drive, Suite 340
West
Orange, New Jersey 07052
NOTICE
OF
2009
ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON APRIL 30, 2009
To the
Shareholders of Lincoln Educational Services Corporation:
NOTICE IS HEREBY GIVEN that
the Annual Meeting of Shareholders of Lincoln Educational Services Corporation,
a New Jersey corporation (the “Company”), will be held on April 30, 2009, at the
Wilshire Grand Hotel, 350 Pleasant Valley Way, West Orange, New Jersey 07052, at
10:00 a.m. local time. At the annual meeting, shareholders will be
asked:
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1.
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To
elect 10 directors to serve until the Company’s next annual meeting of
shareholders and until their successors are duly elected and
qualified.
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2.
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To
approve an amendment to the Company’s 2005 Non-Employee Directors
Restricted Stock Plan to increase the numbers of shares available for
grants under the plan.
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3.
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To
ratify the appointment of Deloitte & Touche LLP as the Company’s
independent registered public accounting firm for our fiscal year ending
December 31, 2009.
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4.
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To
transact such other business as may properly come before the annual
meeting or any adjournment or postponement thereof and may properly be
voted upon.
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The board
of directors of the Company has fixed the close of business on March 17, 2009 as
the record date for the determination of shareholders entitled to notice of and
to vote at the annual meeting and any adjournment or postponement
thereof.
All
shareholders are cordially invited to attend the annual meeting in person.
Shareholders of record as of the close of business on March 17, 2009, the record
date, will be admitted to the annual meeting upon presentation of
identification. Shareholders who own shares of the Company’s common stock
beneficially through a bank, broker or other nominee will be admitted to the
annual meeting upon presentation of identification and proof of ownership or a
valid proxy signed by the record holder. A recent brokerage statement or a
letter from a bank or broker are examples of proof of ownership. If you own
shares of the Company’s common stock beneficially and want to vote in person at
the annual meeting, you should contact your broker or applicable agent in whose
name the shares are registered to obtain a broker’s proxy and bring it to the
annual meeting in order to vote.
WHETHER
OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE RETURN YOUR PROXY (BY
COMPLETING AND RETURNING THE ACCOMPANYING PROXY CARD OR BY GIVING PROXY
AUTHORIZATION VIA THE INTERNET) AS PROMPTLY AS POSSIBLE TO ENSURE YOUR
REPRESENTATION AT THE MEETING. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU
MAY STILL VOTE IN PERSON IF YOU ATTEND THE ANNUAL MEETING. TO ENSURE THAT
YOUR VOTE WILL BE COUNTED, PLEASE CAST YOUR VOTE BEFORE 5:00 P.M. (EASTERN TIME)
ON APRIL 29, 2009.
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By
Order of the Board of Directors
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/s/
Kenneth M. Swisstack
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Kenneth
M. Swisstack
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Corporate
Secretary
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West
Orange, New Jersey
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March
27, 2009
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Table of
Contents
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LINCOLN
EDUCATIONAL SERVICES CORPORATION
200
Executive Drive, Suite 340
West
Orange, New Jersey 07052
PROXY
STATEMENT
FOR
2009
ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD ON APRIL 30, 2009
GENERAL
This
Proxy Statement is provided to the shareholders of Lincoln Educational Services
Corporation, a New Jersey corporation (the “Company”), to solicit proxies, in
the form enclosed, for use at the Annual Meeting of Shareholders of the Company
to be held on April 30, 2009, at the Wilshire Grand Hotel, 350 Pleasant Valley
Way, West Orange, New Jersey 07052, at 10:00 a.m. local time, and any and all
adjournments or postponements thereof. The board of directors knows of no
matters to come before the annual meeting other than those described in this
Proxy Statement. This Proxy Statement and the enclosed form of proxy are first
being mailed to shareholders on or about March 27, 2009.
Solicitation
This
solicitation is made by mail on behalf of the board of directors of the Company.
The Company will pay for the costs of the solicitation. Further solicitation of
proxies may be made, including by mail, telephone, fax, in person or other
means, by the directors, officers or employees of the Company or its affiliates,
none of whom will receive additional compensation for such
solicitation. The Company will reimburse banks, brokerage firms and
other custodians, nominees and fiduciaries for reasonable expenses incurred by
them in sending proxy materials to their customers or principals who are the
beneficial owners of shares of the Company’s common stock, no par value per
share (the “Common Stock”).
Voting
Procedures
Only
those holders of Common Stock of record as of the close of business on March 17,
2009, the record date, will be entitled to notice of and to vote at the annual
meeting. A total of 26,623,491 shares of Common Stock were issued and
outstanding as of the record date. Each share of Common Stock entitles its
holder to one vote. Cumulative voting of shares of Common Stock is not
permitted.
Shareholders
of record can vote either in person at the annual meeting or by proxy whether or
not they attend the meeting. To vote by proxy, a shareholder must
either: (a) fill out the enclosed proxy card, date and sign it, and return it in
the enclosed postage-paid envelope, or (b) vote by Internet (instructions on
Internet voting accompany the proxy card).
The
presence in person or by proxy of holders of a majority of the outstanding
shares of Common Stock entitled to vote will be necessary to constitute a quorum
to transact business at the annual meeting. Abstentions and broker non-votes
will be treated as present for purposes of determining the existence of a
quorum. At the annual meeting, directors will be elected by a plurality of the
votes cast and a majority of the votes cast will be required to amend the
Company’s 2005 Non-Employee Directors Restricted Stock Plan and to ratify the
appointment of Deloitte & Touche LLP as the Company’s independent registered
public accounting firm. Abstentions, however, will not be counted as
votes “for” or “against” the election of directors, “for” or “against” the
amendment of the Company’s 2005 Non-Employee Directors Restricted Stock Plan or
“for” or “against” the ratification of the appointment of Deloitte & Touche
LLP. It is expected that brokers will have discretionary power to
vote on each of the proposals.
Shares of
Common Stock represented by properly executed proxies in the form enclosed that
are timely received by the Secretary of the Company and not validly revoked will
be voted as specified on the proxy. If no specification is made on a properly
executed and returned proxy, the shares represented thereby will be voted FOR
the election of each of the 10 nominees for director named in this Proxy
Statement, FOR the amendment of the Company’s 2005 Non-Employee Directors
Restricted Stock Plan and FOR the ratification of the appointment of Deloitte
& Touche LLP as the independent registered public accounting firm of the
Company. If any other matters properly come before the annual
meeting, it is the intention of the persons named in the accompanying proxy to
vote such proxies in their discretion. In order to be voted, each proxy must be
filed with the Secretary of the Company prior to exercise.
Revocability
of Proxies
Shareholders
may revoke a proxy at any time before the proxy is exercised. This may be done
by filing a notice of revocation of the proxy with the Secretary of the Company,
by filing a later-dated proxy with the Secretary of the Company or by voting in
person at the annual meeting.
PROPOSAL NUMBER ONE—ELECTION OF DIRECTORS
Shareholders
will be asked at the annual meeting to elect 10 directors. Our bylaws
allow for a minimum of three directors and a maximum of 11 directors. Each
elected director will hold office until the next annual meeting of shareholders
and until the director’s successor is duly elected and qualified. The
board of directors knows of no reason why any of the nominees would be unable or
unwilling to serve, if elected, but if any nominee should for any reason be
unable or unwilling to serve, if so elected, the proxies received by the Company
will be voted for the election of such other person for the office of director
as the board of directors may recommend in the place of such
nominee.
Shareholders
may withhold authority to vote their proxies for either (i) the entire
slate of nominated directors by checking the box marked WITHHOLD AUTHORITY on
the proxy card, or (ii) any one or more of the individual nominees, by
following the instructions on the proxy card. Instructions on the accompanying
proxy card that withhold authority to vote for one or more of the nominees will
cause any such nominee to receive fewer votes.
Upon
recommendation of the Nominating and Corporate Governance Committee, the
following 10 persons have been selected by the board of directors as nominees
for election to the board of directors: David F. Carney, Shaun E. McAlmont,
Alexis P. Michas, James J. Burke, Jr., Jerry G. Rubenstein, Paul E. Glaske,
Peter S. Burgess, J. Barry Morrow, Celia H. Currin and Charles F. Kalmbach. All
of the nominees are incumbent directors, except for Mr. McAlmont. Additional
information about these nominees is provided in the table and biographical
information that follow.
Required
Vote
A
plurality of the votes cast at the annual meeting is required for the election
of directors.
The
board of directors unanimously recommends a vote FOR each of the named
nominees.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The
following sets forth certain information concerning the directors and executive
officers of the Company as of the record date for the annual
meeting:
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Name
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Age
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Position
Held
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David
F. Carney (1)
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69
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Chief
Executive Officer and Chairman of the Board of
Directors
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Shaun
E. McAlmont
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43
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President
and Chief Operating Officer
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Scott
M. Shaw
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46
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Executive
Vice President and Chief Administrative Officer
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Cesar
Ribeiro
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44
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Senior
Vice President, Chief Financial Officer and Treasurer
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Alexis
P. Michas (1) (3) (4)
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51
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Director
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James
J. Burke, Jr. (1) (3) (4)
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57
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Director
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Jerry
G. Rubenstein (2) (5)
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78
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Director
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Paul
E. Glaske (3) (4) (5)
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75
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Director
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Peter
S. Burgess (2) (5)
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66
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Director
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J.
Barry Morrow (4) (5)
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56
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Director
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Celia
H. Currin (2) (5)
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60
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Director
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Charles
F. Kalmbach (2) (3) (5)
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62
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Director
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__________
(1)
Member of the Executive Committee.
(2)
Member of the Audit Committee.
(3)
Member of the Compensation Committee.
(4)
Member of the Nominating and Corporate Governance Committee.
(5)
Independent director.
On
January 21, 2009, the Company announced that Shaun E. McAlmont,
currently our President and Chief Operating Officer, will assume the title and
duties of President and Chief Executive Officer, effective April 30, 2009.
David F. Carney will continue to serve as Chairman and Chief Executive
Officer of the Company through April 29, 2009 and will assume the title and
duties of Executive Chairman of the Company beginning April 30,
2009.
David F. Carney joined us in
1999 as Chief Executive Officer and Chairman of the board of directors, prior to
which he served as a consultant following the sale of his two school companies
to Computer Learning Centers, Inc. Previously, Mr. Carney spent
20 years in various capacities with British Oxygen Group Limited, including
CFO and Vice President of Development of the Education Services Division which
operated 25 technical schools. From 1990 to 1992, Mr. Carney was President
of the Massachusetts Association of Private Career Schools. Mr. Carney
received a B.S. from Seton Hall University. Mr. Carney has over 30 years of
experience in the career education industry.
Shaun E. McAlmont joined us in
2005 and currently serves as our President and Chief Operating Officer.
Prior to taking this position, Mr. McAlmont served as Executive Vice President
and President of Online and Group Vice President of the Company. Prior to
joining Lincoln, Mr. McAlmont spent six years as an executive with the Alta
Colleges Corporation serving as President of Westwood College Online and prior
to that as a Regional Vice President for Alta. Mr. McAlmont earned
his B.S. from Brigham Young University and his M.A. in Education from the
University of San Francisco.
Scott M. Shaw joined us in
2001 and currently serves as our Executive Vice President and Chief
Administrative Officer. Prior to taking this position, Mr. Shaw
served as Executive Vice President and Senior Vice President of Strategic
Planning and Business Development. Prior to joining Lincoln, Mr. Shaw
was a partner at Stonington Partners, Inc., where he had been since 1994. As a
partner at Stonington, Mr. Shaw was responsible for identifying, evaluating
and acquiring companies and then assisting in the oversight of these companies
through participation on the board of directors. In addition, Mr. Shaw
worked closely with senior management to develop long-term strategic plans, to
evaluate acquisition and new investment opportunities, to assist with
refinancings, and to execute on the final sale of the company either to the
public or to another company. Mr. Shaw also served as a consultant to
Merrill Lynch Capital Partners Inc., a private investment firm associated with
Merrill Lynch & Co., Inc. from 1994 through 2000. Mr. Shaw holds an
M.B.A. from the Wharton School of Business and a B.A. from Duke
University.
Cesar Ribeiro joined us in
2004 and currently serves as our Senior Vice President, Chief Financial Officer
and Treasurer. From September 2002 through June 2004, Mr. Ribeiro
was self-employed providing both consulting services and private money
management services. Prior to that, he was an audit partner with Arthur Andersen
LLP, where he had been since 1987. Mr. Ribeiro holds a B.S. from Rutgers
University.
Alexis P. Michas has served on
our board of directors since 1999. He has been the Managing Partner of
Stonington Partners, Inc. since 1996. Mr. Michas received an A.B. from
Harvard University and an M.B.A. from Harvard University Graduate School of
Business Administration. Mr. Michas also is a director of
BorgWarner Inc., PerkinElmer, Inc., Air Tran Airways, Inc. and a
number of privately-held companies.
James J. Burke, Jr. has
served on our board of directors since 1999. He has been a partner and director
of Stonington Partners Inc. since 1994. He received a B.A. from Brown University
and an M.B.A with Distinction from Harvard University Graduate School of
Business Administration. Mr. Burke also serves on the board of directors of
Ann Taylor Stores Corporation and a number of non-profit
organizations.
Jerry G. Rubenstein has served
on our board of directors since 1999. Mr. Rubenstein has organized and
managed several entrepreneurial ventures, including OMNI Management Associates,
where he has served as President since 1979. Mr. Rubenstein currently
serves on the boards of directors of The Philadelphia Chamber Music Society (as
Chairman), Marlboro Music School, Inc., The Mary Louise Curtis Bok
Foundation and The Foreign Policy Research Institute. Mr. Rubenstein
received his bachelor of business administration from the City College of New
York.
Paul E. Glaske has served on
our board of directors since 2004. Mr. Glaske was Chairman and Chief
Executive Officer from April 1992 until his retirement in 1999 of Blue Bird
Corporation, a leading manufacturer of school buses, motorhomes and a variety of
other vehicles. He currently serves on the board of directors of
Camcraft, Inc., Energy Transfer Partners and Energy Transfer
Equities. He is also on the Senior Council of the Texas Association
of Business. Mr. Glaske earned his B.S. in Business Administration from Bob
Jones University and his M.B.A. from Pepperdine University.
Peter S. Burgess, CPA has
served on our board of directors since 2004. In 1999, Mr. Burgess retired
from Arthur Andersen LLP where he was an accounting and business advisory
partner serving numerous manufacturing, insurance and financial services
enterprises. Following his retirement, he has provided consulting services
specializing in litigation support, mergers and acquisitions and audit committee
responsibilities under securities exchange requirements and the Sarbanes-Oxley
Act. Mr. Burgess is also a director and chair of the audit committees of
PMA Capital Corporation and John Hancock Trust and Funds
II. Mr. Burgess earned a B.S. in Business Administration from
Lehigh University.
J. Barry Morrow has served on
our board of directors since 2006. He served as the Chief Executive
Officer of Collegiate Funding Services from 2002 until 2006 when the company was
merged with JPMorgan Chase. Mr. Morrow held the position of President and Chief
Operating Officer of Collegiate Funding from 2000 to 2002. Prior to joining
Collegiate Funding Services, Mr. Morrow served with the U.S. Department of
Education as the General Manager of Financial Services for the Office of Student
Financial Assistance and with SallieMae as Vice President of Regional
Operations. Mr. Morrow holds a B.A. from Virginia Tech and a M.A. in public
administration from George Washington University.
Celia H. Currin has served on
our board of directors since 2006. Ms. Currin is the Founder and CEO
of BenchStrength Marketing, a marketing consultancy group focused on the
information and media industries and of WhisperStreet.biz, an automatic website
maker for small businesses. Prior to founding BenchStrength in 2003, Ms. Currin
spent 25 years in a variety of senior management roles with Dow Jones &
Company. She is President of the Board of Directors of Poets & Writers, the
nation’s largest non-profit organization serving creative writers. Ms. Currin
received her M.B.A. from Harvard Business School and her B.S from the University
of Oregon.
Charles F. Kalmbach was
appointed to our board of directors on August 1, 2008. Mr. Kalmbach
has over 30 years of experience in a variety of industries including
financial, professional and business services, healthcare and non-profit
organizations. Since retiring as a Global Managing Partner of
Accenture, Ltd., he has served as the CEO of DBM, Inc., the global
human capital management firm, and as Princeton University's Chief
Administrative Officer. He currently serves as the Vice Chairman of the Board of
the University Medical System at Princeton and Chair of the Audit Committee of
the Board of Resources for the Future in Washington, D.C.; and previously as a
member of the Board of Midwest Airlines. Mr. Kalmbach earned his B.S., MA
and PhD degrees from Princeton University and a J.D. in corporate and
international law from the University of Pennsylvania.
Information on Board of Directors and its
Committees
Directors
are expected to attend our annual meeting of shareholders, board meetings and
meetings of the committees on which they serve. They are also expected to
prepare for meetings in advance and to dedicate the time at each meeting as
necessary to properly discharge their responsibilities. Informational materials,
useful in preparing for meetings, are distributed in advance of each meeting. In
2008, there were six meetings of the board, and each of the directors attended
at least 83% of the meetings of the Board and committees on which he or she
served. In addition, all of our directors attended our 2008 Annual Meeting of
Shareholders.
The board
of directors has an Audit Committee, a Nominating and Corporate Governance
Committee and a Compensation Committee.
Audit Committee
The Audit
Committee consists of directors Burgess (Chairman), Currin, Kalmbach and
Rubenstein. It held five meetings in 2008. The board of directors has adopted a
written charter for the Audit Committee. The charter of the Audit Committee is
available on our website at www.lincolnedu.com. The
Audit Committee is directly responsible, among other things, for our accounting
and financial reporting processes; the quality and integrity of our financial
statements; the quality and integrity of our system of internal controls; our
compliance with laws and regulations; our independent auditor's qualifications
and independence; and the audit of our financial statements by a qualified
independent auditor.
To
fulfill these responsibilities, the Audit Committee will be aware of the current
areas of greatest financial risk to us and understand management's assessment
and management of the risks; consider the effectiveness of our disclosure
controls and procedures to promote timely, accurate, compliant and meaningful
disclosure in our periodic reports filed with the Securities and Exchange
Commission (“SEC”); periodically review with the independent auditors their
assessment as to the adequacy of our structure of internal controls over
financial accounting and reporting, and their qualitative judgments as to the
accounting principles employed and related disclosures by us and the conclusions
expressed in our financial reports; review with management and the
independent auditors our accounting policies and practices to ensure they meet
the requirements with respect to the FASB, the SEC, the American Institute of
Certified Public Accountants and the Public Company Accounting Oversight Board;
select, evaluate and, if necessary, replace our independent auditors; actively
engage in dialogue with the independent auditors with respect to any disclosed
relationships or services that may impact the objectivity or independence of the
independent auditors; engage advisors, as the committee determines is necessary,
to carry out its duties; meet with the independent auditors, the internal
auditors and senior management to review the scope and methodology of the
proposed audit; discuss with management policies and practices regarding
earnings press releases, as well as financial information and earnings
guidelines provided to analysts and rating agencies to the extent required by
applicable law or listing standards; set clear hiring policies with respect to
any current or former employees of our independent auditors; and establish
procedures for the receipt, retention and treatment of complaints we receive
regarding our internal accounting controls or auditing matters and for the
confidential, anonymous submission by employees of their concerns regarding our
internal accounting controls and auditing matters. The Audit
Committee is also charged with reviewing and approving all related person
transactions.
The board
of directors has determined that each of Messrs. Burgess and Rubenstein is
an “audit committee financial expert” within the meaning of the regulations of
the SEC. Messrs. Burgess, Kalmbach and Rubenstein and Ms. Currin
are independent directors under the Sarbanes-Oxley Act of 2002 and the Nasdaq
listing standards.
Nominating and Corporate Governance
Committee
The
Nominating and Corporate Governance Committee consists of directors Michas
(Chairman), Burke, Glaske and Morrow. The composition of the
Nominating and Corporate Governance Committee does not, and is not required to,
satisfy the independence requirements of The Nasdaq Global Market because we are
a controlled company. The Nominating and Corporate Governance
Committee held two meetings in 2008. The charter for the Nominating and
Corporate Governance Committee is published on our website at www.lincolnedu.com. The
Nominating and Corporate Governance Committee is responsible for, among
other things, making recommendations to the board of directors with respect to
corporate governance policies and reviewing and recommending changes to the
Company’s corporate governance guidelines that have been adopted by the board of
directors. The Nominating and Corporate Governance Committee also recommends to
the board of directors candidates for nomination for election as directors of
the Company and appointments of directors as members of the committees of the
board of directors.
The
Nominating and Corporate Governance Committee considers candidates for directors
suggested by shareholders for elections to be held at an annual meeting of
shareholders. Shareholders can suggest qualified candidates for directors by
complying with the advance notification and other requirements of the Company’s
bylaws regarding director nominations. Director nomination materials submitted
in accordance with the Company’s bylaws will be forwarded to the Chairman of the
Nominating and Corporate Governance Committee for review and consideration.
Director nominees suggested by shareholders will be evaluated in the same
manner, and subject to the same criteria, as other nominees evaluated by the
Nominating and Corporate Governance Committee. The Nominating and Corporate
Governance Committee also considers candidates for director suggested by its
members, other directors and management and may from time to time retain a
third-party executive search firm to identify director candidates for the
Nominating and Corporate Governance Committee.
Generally,
once the Nominating and Corporate Governance Committee has identified a
prospective nominee, it will make an initial determination as to whether to
conduct a full evaluation of the candidate based on information provided to it
with the recommendation of the candidate, as well as the Nominating and
Corporate Governance Committee’s own knowledge of the candidate, which may be
supplemented by inquiries to the person making the recommendation or others. The
initial determination is based primarily on the need for additional directors to
fill vacancies or expand the size of the board of directors and the likelihood
that the candidate can satisfy the evaluation factors described below. If the
Nominating and Corporate Governance Committee determines, in consultation with
the Chairman of the Board and other directors, as appropriate, that additional
consideration is warranted, it may request a third-party search firm to gather
additional information about the candidate’s background and experience and to
report its findings to the Nominating and Corporate Governance Committee. The
Nominating and Corporate Governance Committee then evaluates the candidate
against the standards and qualifications set out in guidelines for director
candidates adopted by the board of directors, including, without limitation, the
nominee’s management, leadership and business experience, skill and diversity,
such as financial literacy and knowledge of directorial duties, and integrity
and professionalism.
The
Nominating and Corporate Governance Committee also considers such other relevant
factors as it deems appropriate, including the current composition of the board
of directors, the balance of management and independent directors, the need for
particular expertise (such as Audit Committee expertise) and the evaluations of
other prospective nominees. In connection with this evaluation, the Nominating
and Corporate Governance Committee determines whether to interview the
prospective nominee, and, if warranted, one or more members of the Nominating
and Corporate Governance Committee, and others as appropriate, interview
prospective nominees in person or by telephone. After completing this evaluation
and interview, the Nominating and Corporate Governance Committee makes a
recommendation to the full board of directors as to the persons who should be
nominated by the board of directors and the board of directors determines the
nominees after considering the recommendation of the Nominating and Corporate
Governance Committee.
Compensation Committee
The
Compensation Committee consists of directors Burke (Chairman), Glaske, Kalmbach
and Michas. The composition of the Compensation Committee does not,
and is not required to, satisfy the independence requirements of The Nasdaq
Global Market because we are a controlled company. The Compensation
Committee held three meetings in 2008. The Compensation Committee has the
authority to develop and maintain a compensation policy and strategy that
creates a direct relationship between pay levels and corporate performance and
returns to stockholders; recommend compensation and benefit plans to
our board for approval; review and approve annual corporate and
personal goals and objectives to serve as the basis for the chief executive
officer's compensation, evaluate the chief executive officer's performance in
light of the goals and, based on such evaluation, determine the chief executive
officer's compensation; determine the annual total compensation for
our named executive officers; with respect to our equity-based
compensation plans, approve the grants of stock options and other equity-based
incentives as permitted under our compensation plans; review and
recommend compensation for non-employee directors to our board;
and review and recommend employment agreements, severance
arrangements and change of control plans that provide for benefits upon a change
in control, or other provisions for our executive officers and directors, to our
board. The Compensation Committee may retain compensation consultants having
special competence to assist it in evaluating director and executive
compensation and may also retain counsel, accountants or other advisors, in its
sole discretion. In 2008, the Compensation Committee did not retain
any compensation consultants. The Compensation Committee also has the
power to delegate its authority and duties to subcommittees or individual
members of the committee, as it deems appropriate in accordance with applicable
laws and regulations. The charter for the Compensation Committee is
published on our website at www.lincolnedu.com.
Compensation Committee Interlocks and Insider
Participation
Messrs. Burke,
Glaske and Michas served on the Compensation Committee during the entire 2008
fiscal year. In addition, Charles Kalmbach has served on our
Compensation Committee since his appointment to the board of directors on August
1, 2008. There were no Compensation Committee interlocks or insider
(employee) participation during 2008.
SECURITY OWNERSHIP OF MANAGEMENT
AND
PRINCIPAL SHAREHOLDERS
The
following tables provide information regarding the beneficial ownership of our
Common Stock as of the record date for the annual meeting by (1) each of
our directors, (2) each of our named executive officers, (3) all
directors and executive officers as a group, and (4) each person known to
us to be the beneficial owner of more than 5% of the outstanding shares of our
Common Stock. This table is based on information provided to us or filed with
the SEC by our directors, executive officers and principal shareholders named
below. Except as otherwise indicated, we believe, based on information furnished
by such owners, that the beneficial owners of our Common Stock listed below have
sole investment and voting power with respect to such shares, subject to
community property laws where applicable.
CERTAIN
BENEFICIAL OWNERS
As of
March 17, 2009, the only persons or groups that are known to us to be the
beneficial owners of more than five percent of the outstanding shares of our
Common Stock are:
|
Name
and Address of Beneficial Owner
|
Number
of Shares of
Common
Stock
Beneficially
Owned
|
Percent
of Common Stock
Beneficially
Owned on
February
18, 2009
|
||
|
Back
to School Acquisition L.L.C. (1)
|
15,161,976
|
56.9%
|
||
|
Hart
Capital LLC (2)
|
1,641,612
|
6.2%
|
__________
|
(1)
|
Based
on the information reported in a statement on Schedule 13G/A filed
with the SEC on February 17, 2009 by Stonington Capital Appreciation
1994 Fund, L.P. (the “Stonington Fund”), Stonington Partners, L.P. (“SP”),
Stonington Partners, Inc. II (“SPII”), Stonington Partners, Inc.
(“Stonington”) and Back to School Acquisition, L.L.C. (“BSA”)
(collectively, the “Stonington Entities”), the information reported in a
statement on Form 4 filed by SPII with the SEC on February 20, 2009 and
information provided to us by Stonington Entities, BSA and Five Mile River
Capital Partners LLC (“FMRCP”), Hart Capital LLC and Steven W.
Hart. SPII is the general partner of SP, and SP is the general partner of
the Stonington Fund. Stonington is the management company,
which, pursuant to a management agreement with the Stonington Fund, has
full discretionary authority with respect to the Stonington Fund’s
investments, including the authority to make and dispose of such
investments. The Stonington Fund controls, and has a 100%
economic interest in, BSA. BSA (i) owns 13,508,000 shares of
Common Stock of the Company, (ii) has the power to direct the voting and,
in certain circumstances the disposition, of 1,637,100 shares of Common
Stock of the Company through a voting agreement with FMRCP (of which Hart
Capital LLC is the managing member), (iii) has the power to direct the
voting and, in certain circumstances the disposition, of 10,364 shares
through stockholders’ agreements with Steven W. Hart and various Hart
family trusts, and (iv) has the power to direct the voting and, under
certain circumstances, through the exercise of drag-along rights, the
disposition of 6,512 shares of Common Stock through a Stockholders’
Agreement, dated as of June 22, 2005, with Steven W. Hart, the Steven W.
Hart 2003 Grantor Retained Annuity Trust (which terminated by its own
terms on December 24, 2005) and the Company. Alexis P. Michas
is the Managing Partner of Stonington Partners, Inc. II and James J.
Burke, Jr. is a Partner of Stonington Partners, Inc. II. Both are members
of our board of directors. Both BSA and Stonington Entities
have their business address at 600 Madison Avenue, 16th Floor, New
York, New York 10022. We have not attempted to independently
verify any of the foregoing
information.
|
|
(2)
|
Based
on the information reported in a statement on Schedule 13G/A filed
with the SEC on February 12, 2009 by Steven W. Hart, FMRCP and Hart
Capital LLC, and information provided to us by Steven W. Hart, FMRCP
and Hart Capital LLC. The total number of shares
consists of 1,637,100 shares held by FMRCP, of which Hart Capital LLC
is the managing member. Steven W. Hart, a former member of our board of
directors, is a Managing Director of Hart Capital LLC. Mr. Hart
may be deemed to be the beneficial owner of these shares by virtue of his
membership interests in, and/or position as President of, Hart Capital
LLC. Both Mr. Hart and Hart Capital LLC disclaim beneficial
ownership of all shares held by FMRCP. The total number
of shares also consists of 4,512 shares held by Mr.
Hart. The total number of shares does not include 10,364
shares of our common stock held in trusts for the benefit of Mr. Hart’s
children, as to which Mr. Hart’s wife serves as sole trustee, and 2,000
shares held by Mr. Hart’s wife, as to which Mr. Hart disclaims beneficial
ownership. The business address for FMRCP, Hart Capital LLC and Mr. Hart
is 131 Rowayton Avenue, Rowayton, Connecticut 06853. We have not
attempted to independently verify any of the foregoing
information.
|
The
following table sets forth information as to the beneficial ownership of shares
of our Common Stock as of March 17, 2009 of each director, including each
nominee for director, and each named executive officer and all directors and
executive officers of the Company, as a group. Except as otherwise indicated in
the footnotes to the table, each individual has sole investment and voting power
with respect to the shares of Common Stock set forth.
|
Name
of Beneficial Owners (1) (2)
|
Number
of Shares of Common Stock
Beneficially
Owned
|
Percent
of Common Stock
Beneficially
Owned
|
||
|
David
F. Carney (3)
|
548,942
|
2.1%
|
||
|
Shaun
E. McAlmont (4)
|
118,218
|
*
|
||
|
Scott
M. Shaw (5)
|
412,477
|
1.5%
|
||
|
Cesar
Ribeiro (6)
|
144,307
|
0.5%
|
||
|
Alexis
P. Michas (7)
|
15,636,506
|
58.7%
|
||
|
James
J. Burke, Jr. (8)
|
15,636,506
|
58.7%
|
||
|
Jerry
G. Rubenstein (9)
|
54,670
|
*
|
||
|
Paul
E. Glaske
|
13,530
|
*
|
||
|
Peter
S. Burgess
|
13,030
|
*
|
||
|
J.
Barry Morrow
|
11,586
|
*
|
||
|
Celia
H. Currin
|
11,586
|
*
|
||
|
Charles
F. Kalmbach
|
3,992
|
*
|
||
|
All
executive officers and directors as a group
|
16,979,874
|
63.8%
|
__________
|
*
|
Less
than 0.5%.
|
|
(1)
|
“Beneficial
ownership” is a term broadly defined by the SEC in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended, and includes more than
the typical forms of stock ownership, that is, stock held in the person’s
name. The term also includes what is referred to as “indirect ownership,”
meaning ownership of shares as to which a person has or shares investment
or voting power. For purpose of this table, a person or group of persons
is deemed to have “beneficial ownership” of any shares as of a given date
that such person or group has the right to acquire within 60 days
after such date.
|
|
(2)
|
For
purposes of the above table, the address for each named person is 200
Executive Drive, Suite 340, West Orange, New Jersey
07052.
|
|
(3)
|
Includes
192,288 shares of common stock currently held of record. Also
includes options to purchase 356,654 shares of common
stock.
|
|
(4)
|
Includes
55,884 shares of common stock currently held of record. Also
includes options to purchase 62,334 shares of common
stock.
|
|
(5)
|
Includes
116,977 shares of common stock currently held of record. Also
includes options to purchase 295,500 shares of common
stock.
|
|
(6)
|
Includes
55,972 shares of common stock currently held of record. Also
includes options to purchase 88,335 shares of common
stock.
|
|
(7)
|
Alexis
P. Michas serves on our board of directors and is the Managing Partner of
Stonington Partners, Inc. II, our largest shareholder, which controls,
through its controlled subsidiary Back to School Acquisition, L.L.C.,
56.9% of our common stock. Mr. Michas disclaims beneficial ownership
of all but 11,030 shares of our common
stock.
|
|
(8)
|
James
J. Burke, Jr. serves on our board of directors and is a Partner of
Stonington Partners, Inc. II, our largest shareholder, which controls,
through its controlled subsidiary Back to School Acquisition, L.L.C.,
56.9% of our common stock. Mr. Burke disclaims beneficial ownership
of all but 11,030 shares of our common
stock.
|
|
(9)
|
Jerry
G. Rubenstein serves on our board of directors and is the beneficial owner
of 54,670 shares of our common stock. The amount listed in the table
includes options to purchase 33,070 shares of common
stock.
|
Section 16(a) Beneficial Ownership Reporting
Compliance
Section 16(a) of
the Securities Exchange Act of 1934, as amended, requires the Company’s
directors and officers and beneficial owners of 10% or more of the Company’s
Common Stock to file reports of ownership of, and transactions in, the Company’s
securities with the SEC, the Nasdaq Global Market and the
Company. The Company believes that all SEC filing requirements
applicable to the Company’s directors and executive officers and beneficial
owners of 10% or more of the Company’s Common Stock for 2008 were timely
met.
Equity Compensation Plan
Information
The
following table summarizes the Company’s equity compensation plan information as
of December 31, 2008.
Equity
Compensation Plan Information
as
of December 31, 2008
|
Plan
Category
|
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
|
Weighted-average
exercise price of outstanding options, warrants and rights
($)
|
Number
of securities available for future issuance under equity compensation
plans (excuding securities reflected in column (a))
|
|
(a)
|
(2)
|
(c)
|
|
|
Equity
compensation plans approved by Lincoln shareholders (1)
|
1,154,633
|
8.92
|
603,474
|
|
Equity
compensation plans not approved by Lincoln shareholders
|
-
|
-
|
-
|
|
Total
|
1,154,633
|
8.92
|
603,474
|
__________
|
(1)
|
The
equity compensation plans approved by the Company’s shareholders include
the 2005 Long-Term Incentive Plan and the 2005 Non-Employee Directors
Restricted Stock Plan. All of the Company’s equity compensation
plans have been approved by our
shareholders.
|
|
(2)
|
Weighted
average exercise price of outstanding stock options; excludes restricted
stock.
|
COMPENSATION DISCUSSION AND ANALYSIS
This
section provides an overview and analysis of our compensation program and
policies, the material compensation decisions we have made under those programs
and policies, and the material factors that we considered in making those
decisions. Later in this proxy statement under the heading “Additional
Information Regarding Executive Compensation,” you will find a series of tables
containing specific information about the compensation earned or paid in 2008 to
the following individuals, whom we refer to as our named executive
officers:
|
|
●
|
David
F. Carney, Chairman and Chief Executive
Officer
|
|
|
●
|
Shaun
E. McAlmont, President and Chief Operating
Officer
|
|
|
●
|
Scott
M. Shaw, Executive Vice President and Chief Administrative
Officer
|
|
|
●
|
Cesar
Ribeiro, Senior Vice President, Chief Financial Officer and
Treasurer
|
In 2008,
the Company had only four executive officers.
The
discussion below is intended to help you understand the detailed information
provided in those tables and put that information into context within our
overall compensation program.
Compensation
Committee
The
Compensation Committee of the Board of Directors (the “Committee”) has
responsibility for establishing, implementing and monitoring adherence with our
compensation program. The role of the Committee is to oversee, on behalf of the
Board and for the benefit of the Company and its shareholders, our compensation
and benefit plans and policies, administer our stock plans (including reviewing
and approving equity grants to directors and executive officers) and review and
approve annually all compensation decisions relating to our named executive
officers. The Committee’s charter requires that the Committee meet a
minimum of two times annually to review executive compensation programs, approve
compensation levels and performance targets, review management performance, and
approve final executive bonus distributions. The Committee met three
times in 2008.
Compensation Philosophy and
Objectives
The
Company and the Committee believe that compensation paid to executive officers
should be closely aligned with our performance on both a short-term and
long-term basis, and that such compensation should assist us in attracting and
retaining key executives critical to our long-term success.
Our
compensation program is designed to offer executive officers competitive
compensation based on our performance, our unique niche, strategy, business
model and execution and on the individual’s contribution, performance and
leadership. Our compensation policies are intended to motivate, reward and
retain highly qualified executives for long-term strategic management and the
enhancement of shareholder value, to support a performance-oriented environment
that rewards achievement of specific internal Company goals, and to attract and
retain executives whose abilities are critical to our long-term success and
competitiveness.
The
Compensation Committee has reviewed all components of the compensation for the
named executive officers, including salary, bonus, equity and long-term
incentive compensation, accumulated realized and unrealized stock options, the
dollar value to the executive and cost to the Company of all perquisites, and
the actual projected payout obligations under potential severance and
change-in-control scenarios.
Setting Executive
Compensation
We intend
to continue our strategy of compensating our executives through programs that
emphasize performance-based incentive compensation. We have structured annual
and long-term cash and non-cash executive compensation to motivate executives to
achieve the business goals set by the Company and rewards the executives for
achieving such goals. For the named executive officers, the current compensation
package includes a base salary, an annual cash incentive and grants of
restricted stock. Base salary is intended to provide a certain level of income
commensurate with an executive’s position, responsibilities, and contributions
to the Company. The Committee believes the combined value of base salary plus
annual cash incentive is competitive with the salary and bonus provided to
similarly situated executives for companies in our industry. In allocating
compensation among these components, the Committee believes that the
compensation of our senior levels of management, the levels of management having
the greatest ability to influence our performance, should be predominately
performance based, while lower levels of management should receive a greater
portion of their compensation as base salary. The Committee approves
and oversees the total compensation package for the Company’s Chief Executive
Officer including, without limitation, his base salary, annual incentives, stock
options and other equity-based compensation and reviews the recommendations of
the Company’s Chief Executive Officer in connection with the total compensation
package for each of the other named executive officers.
The three
main components in our executive compensation program are:
|
|
●
|
Base
Salary
|
|
|
●
|
Annual
Incentive Bonus
|
|
|
●
|
Stock
Incentives
|
Base
Salary
Base
salaries for our named executive officers are based on job responsibilities and
individual contribution with reference to base salary levels of executives at
comparable publicly held companies and our general compensation
practices. Our base salary levels reflect a combination of factors,
including competitive pay levels, the executive’s experience and tenure, our
overall annual budget for merit increases and pre-tax profit, the executive’s
individual performance, and changes in responsibility. We review salary levels
annually to recognize these factors. We do not target base salary at any
particular percent of total compensation.
Annual
Incentive Bonus
Our named
executive officers are eligible to participate in the Management Incentive
Compensation Plan (the “MIC Plan”). Under the MIC Plan, the Committee
approves an annual incentive cash bonus calculation for our named executive
officers taking into account certain financial performance targets and the
individual’s strategic task accomplishments. Such bonuses, if any,
are intended to reflect the Committee’s belief that a portion of the annual
compensation of each executive officer should be contingent upon the performance
of the Company, as well as the individual contribution of each
officer. The amount of such bonus will be based upon our achievement
of revenue and net income targets as well as each officer’s achievement of their
own key non-financial performance objectives, in each case established each year
by the Committee and our Board of Directors.
For 2008,
the Committee and our Board of Directors set the target bonus levels equal to
100% of base salary for our Chairman and Chief Executive Officer and 75% of base
salary for the named executive officers other than our CEO. For each
of the named executive officers, including the CEO, the bonus calculations were
as follows: (a) 60% of each executive officer’s target bonus would be
awarded if we achieved our net income goal; (b) 20% of the target bonus would be
awarded if we achieved our revenue goal; and (c) 20% of the target bonus would
be awarded if the named executive officer achieved his key non-financial
performance objectives.
Net Income
Component
The named
executive officers can earn a portion of their target bonus if our net income is
within 10% of our annual target goal. For illustration purposes only,
if our net income target was $1,000,000 and our audited financials for that year
showed a net income of $990,000 (or 99% of our target), the named executive
officers would receive 90% of their 60% target bonus attributable to net
income. The percentage would decrease by 10% for each percentage
point under the target goal. Using the same example, if our audited
financials showed net income of $900,000 (or 90% of our goal), the named
executive officers would not receive any portion of their annual bonus
attributable to net income.
Our
executive officers can earn more than their target bonus if our net income is
greater than the target goal. Using the example in the previous
paragraph, if our audited financials for that year showed a net income of
$1,010,000 (or 101% of our target), the named executive officers would receive
104% of their 60% target bonus that is applicable to net income. The
percentage would increase by 4% for each percentage point above the target
goal. The maximum amount that can be earned by each named executive
officer is 200% of their 60% target bonus component for net income.
Our net
income for 2008 was 12% greater than the target goal. Therefore, our
named executive officers received 148% of their 60% target bonus attributable to
net income.
Revenue
Component
Similar
to the net income component, the named executive officers can earn a portion of
their target bonus if our revenues were within 5% of our annual target
goal. For illustration purposes only, if our revenue target was
$100,000,000 and our audited financials for that year showed revenue of
$99,000,000 (or 99% of our target), the named executive officers would receive
80% of their 20% target bonus attributable to revenue. The percentage
would decrease by 20% for each percentage point under the target
goal. Using the same example, if our audited financials showed
revenue of $95,000,000 (or 95% of the Company’s target), the named executive
officers would not receive any portion of their annual bonus attributable to
revenue.
Our
executive officers can earn more than their target bonus if our revenue was
greater than the target goal. Using the example in the previous
paragraph, if the audited financials for that year showed revenue of
$101,000,000 (or 101% of our annual target), the named executive officers would
receive 104% of their 20% target bonus that is applicable to
revenue. The percentage would increase by 4% for each percentage
point over the target goal. The maximum amount that can be earned by
each named executive officer is 200% of their 20% target bonus component for
revenue.
Our
revenue goal for 2008 was 1.4% greater than the target
goal. Therefore, our named executive officers received 106.4% of
their 20% target bonus that was applicable to revenue.
Key Non-Financial
Performance Objectives Component
Each of
our named executive officers can earn 20% of their target bonus for the
achievement of their key non-financial performance objectives. As
discussed earlier, the Committee and our Board of Directors establish key
non-financial performance objectives for each of our named executive
officers. Our named executive officers achieved between 50% and 100%
of their non-financial performance objectives for 2008.
Discretionary
Awards
Our
management has the discretion, subject to the approval of our Chairman and Chief
Executive Officer and the Committee, to make adjustments above or below the
amount calculated under the target formula, in cases where circumstances not
under the control of our named executive officers have affected (positively or
negatively) their ability to meet performance targets. The
Committee approved discretionary award bonuses for 2008 to Messrs. Carney,
McAlmont, Shaw and Ribeiro. These discretionary awards ranged from
37% to 45% of their annual target bonus opportunity. Mr. Carney
cannot award himself a discretionary award.
Aggregate Incentive
Bonus
For 2008,
the named executive officers received an annual incentive bonus ranging from
162% to 175% of their respective target bonus
opportunities. For additional information about the Annual
Incentive Bonuses, please refer to the “Grants of Plan-Based Awards” table,
which shows the target and maximum bonus amounts payable under the plan for
2008, and the Summary Compensation Table, which shows the actual amount of
bonuses paid under the plan to our named executive officers for
2008.
Stock
Incentives
The
Committee believes that stock incentives provide an incentive that focuses the
executive’s attention on the Company from the perspective of an owner with an
equity stake in the business. Restricted stock awards are
granted as long-term incentives to motivate, reward and retain our named
executive officers. The Committee believes that the Company’s long-term
performance is achieved through an ownership culture that encourages long-term
performance by our named executive officers through grants of stock-based
awards.
Stock
option grants provide for potential financial gain derived from the potential
appreciation in stock price from the date that the option is granted until the
date that the option is exercised. Because a financial gain from
stock options is only possible after the price of our common stock has
increased, we believe stock grants encourage executives and other employees to
focus on behaviors and initiatives that should lead to an increase in the price
of our common stock, which benefits all of our shareholders. The exercise price
of stock option grants is set at fair market value on grant date. Under the
shareholder-approved 2005 Long-Term Incentive Stock Plan, the Company may not
grant stock options at a discount to fair market value or reduce the exercise
price of outstanding stock options except in the case of a stock split or other
similar event. The Company’s long-term performance ultimately
determines the value of stock options, because gains from stock option exercises
are entirely dependent on the long-term appreciation of the Company’s stock
price. Generally, stock options granted to named executive officers
vest ratably over a three-year period based on the option holder’s continuous
service with the Company. This vesting feature encourages retention
and provides long-term incentive.
In 2008,
the Committee made grants of restricted stock to our named executive officers
under the Company’s 2005 Long-Term Incentive Plan, but did not award any stock
options. The details of these grants are provided in the Summary
Compensation Table.
No Backdating or Spring Loading
Lincoln
does not backdate options or grant options retroactively. In addition, we do not
plan to coordinate grants of options or restricted shares so that they are made
before announcement of favorable information or after announcement of
unfavorable information. Lincoln’s options are granted at fair market value on
the date the option grants are approved by our Compensation
Committee. Fair market value has been consistently determined as the
closing price on the Nasdaq Global Market on the grant date. All
option grants and restricted stock awards require the approval of the
Compensation Committee. The Company’s general practice is to grant options and
award shares of restricted stock only on the dates of each Committee meeting,
although there are occasions when grants have been made on other
dates.
Retirement
Plans
The
Company maintains a plan qualified under Section 401(k) of the Internal Revenue
Code. At the discretion of our board of directors, we may make
discretionary matching and/or profit-sharing contributions into our 401(k) plan
for eligible employees, which may be subject to vesting requirements. With
respect to each of the named executive officers, the following matching
contributions were made on their behalf under our 401(k) plan for 2008: $3,645
for Mr. Carney; $2,756 for Mr. McAlmont; $4,051 for Mr. Shaw; and $4,034 for Mr.
Ribeiro. We believe that a 401(k) plan induces our employees to save
for future retirement needs and we encourage this by matching 30% of our
employee’s annual contributions, up to 6% of total compensation.
Non-Qualified Deferred
Compensation and Pension Arrangements
None of our named executive officers
participate in a non-qualified deferred compensation program or pension
arrangement.
Perquisites
and Other Personal Benefits
We provide each of the named executive
officers with use of a vehicle for business and personal use and pay for
associated costs, including automobile insurance, parking and fuel, as part of
their employment agreements described below. The value of this
benefit is disclosed in the Summary Compensation Table.
Our named
executive officers are also eligible to participate in (as are all our employees
who meet service requirements under the several plans) our medical and dental
health insurance plans, our life insurance plan (benefit equal to $100,000) and
long-term disability insurance plan.
The
medical and dental plans require a contributory amount to be paid by all
participants. While no participant contribution is required for the life
insurance plan, we do include the cost of those benefits that exceed $50,000 in
participants’ reported income to the Internal Revenue Service. We provide a
long-term disability insurance plan under which we pay the insurance premiums.
In some cases, our named executive officers and other participants have
requested, and been permitted, to pay the premiums themselves, so that any
benefits paid upon disability would not be taxable to the
participant.
We
believe that the several insurance plans we offer are important components of
our comprehensive benefit package, which induces employees to remain with
us.
Payments at Change of
Control or Other Termination
Change in
control provisions benefit the Company’s shareholders by assisting with
retention during rumored and actual change in control activity when continuity
is key to preserving the value of the business. Other termination
benefits are provided based on the time needed by executives of that level to
find new employment.
Compensation Committee Report
The
Compensation Committee has reviewed and discussed with the Company’s management
the Compensation Discussion and Analysis included in this proxy statement. Based
on that review and discussion, the Compensation Committee has recommended to the
Board of Directors that the Compensation Discussion and Analysis be included in
this proxy statement.
|
COMPENSATION
COMMITTEE
|
|
|
James
J. Burke, Jr. (Chairman)
|
|
|
Paul
E. Glaske
|
|
|
Charles
F. Kalmbach
|
|
|
Alexis
P. Michas
|
|
|
Date:
March 26, 2009
|
Executive Compensation
Summary
Compensation Table
for
Fiscal Year End December 31, 2008
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation
($)
|
All
Other Compensation
($)
|
Total
($)
|
|
(1)
|
(2)
|
(3)
|
(4)
|
(5)
|
(6)
|
|||
|
David
F. Carney
|
2008
|
405,000
|
150,000
|
24,000
|
59,764
|
507,959
|
8,116
|
1,154,839
|
|
Chairman of the
Board of Directors
and Chief Executive
Officer
|
2007
2006
|
385,000
375,000
|
63,000
-
|
-
-
|
72,367
59,783
|
77,000
75,000
|
7,815
7,679
|
605,182
517,462
|
|
Shaun
E. McAlmont
|
2008
|
315,000
|
100,000
|
165,500
|
219,914
|
284,497
|
6,628
|
1,091,539
|
|
President
and
|
2007
|
300,000
|
45,000
|
25,032
|
226,416
|
45,000
|
7,012
|
648,460
|
|
Chief
Operating Officer
|
2006
|
247,516
|
108,750
|
-
|
125,874
|
41,250
|
4,412
|
527,802
|
|
Scott
M. Shaw
|
2008
|
310,000
|
100,000
|
165,500
|
39,659
|
291,606
|
7,655
|
914,420
|
|
Chief
Admistrative Officer
|
2007
|
293,333
|
43,500
|
25,032
|
52,539
|
43,500
|
6,594
|
464,498
|
|
Cesar
Ribeiro
|
2008
|
295,000
|
100,000
|
165,500
|
175,260
|
288,559
|
8,072
|
1,032,391
|
|
Senior
Vice President and
|
2007
|
275,000
|
43,750
|
25,032
|
197,833
|
41,250
|
8,186
|
591,051
|
|
Chief
Financial Officer
|
2006
|
250,000
|
-
|
-
|
159,767
|
37,500
|
8,122
|
455,389
|
__________
(1) In
2008, the Company had only four executive officers.
(2) Reflects
the value of discretionary cash incentive bonuses paid under the Company’s
Annual Incentive Plan.
(3) Represents
the proportionate amount of the total fair value of restricted stock grants
recognized by the Company as an expense in 2008 for financial accounting
purposes. The fair values of these grants and the amounts expensed in 2008 were
determined in accordance with Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 123 (revised 2004) Share-Based Payment (FAS
123R). The awards for which expense is shown in this table include the awards
described in the Grants of Plan-Based Awards table beginning on page 15 of this
Proxy Statement. The assumptions used in determining the grant date fair values
of these awards are set forth in the notes to the Company’s consolidated
financial statements, which are included in our Annual Report on Form 10-K for
the year ended December 31, 2008 filed with the SEC.
(4) Represents
the proportionate amount of the total fair value of option awards recognized by
the Company as an expense in 2008 for financial accounting purposes. The fair
values of these awards and the amounts expensed in 2008 were determined in
accordance with FAS 123R. The awards for which expense is shown in this table
include the awards described in the Grants of Plan-Based Awards table beginning
on page 22 of this Proxy Statement, as well as awards granted in 2003 through
2008 for which we continued to recognize expense in 2008. The
assumptions used in determining the grant date fair values of these awards are
set forth in the notes to the Company’s consolidated financial statements, which
are included in our Annual Report on Form 10-K for the year ended December 31,
2008 filed with the SEC.
(5) Reflects
the value of cash incentive bonuses earned under our Annual Incentive
Plan.
(6) Amounts
reflected in this column include 401(k) matching contributions for each named
executive officer as well as the portion of personal use of a company-owned
vehicle by the named executive officers during 2008.
Grants
of Plan-Based Awards
for
Fiscal Year End December 31, 2008
|
Estimated
Future Payouts Under Non-Equity Incentive Plan Awards
|
All
Other Stock Awards:
Number of
Shares of Stock
|
Grant
Date Fair Value
of Stock and
|
||||
| Threshold | Target | Maximum |
or
Units
|
Option
Awards
|
||
|
Name
|
Grant
Date
|
($)
|
($)
|
($)
|
(#)
|
($)
|
|
(1)
|
(1)
|
(2)
|
(3)
|
|||
|
David
F. Carney
|
2/29/2008
|
-
|
405,000
|
607,500
|
-
|
-
|
|
2/29/2008
|
-
|
-
|
-
|
12,000
|
24,000
|
|
|
|
|
|||||
|
Shaun
E. McAlmont
|
2/29/2008
|
-
|
236,250
|
354,375
|
-
|
-
|
|
2/29/2008
|
-
|
-
|
-
|
10,000
|
20,000
|
|
|
|
|
|||||
|
Scott
M. Shaw
|
2/29/2008
|
-
|
232,500
|
348,750
|
-
|
-
|
|
2/29/2008
|
-
|
-
|
-
|
10,000
|
20,000
|
|
|
|
||||||
|
Cesar
Ribeiro
|
2/29/2008
|
-
|
221,250
|
331,875
|
-
|
-
|
|
2/29/2008
|
-
|
-
|
-
|
10,000
|
20,000
|
|
(1) Represents
target and maximum payout levels under the Annual Incentive Plan for 2008
performance. The actual amount of incentive bonus earned by each
named executive officer in 2008 is reported under the Non-Equity Incentive Plan
Compensation column in the Summary Compensation Table. The
Compensation Committee, in its discretion, may award an amount above the
maximum, as discussed in our Compensation Discussion and Analysis.
(2) Restricted
Stock Grants were awarded under the Company’s 2005 Long-Term Incentive
Plan. These grants vest ratably on the first through fifth year
anniversary of the grant date.
(3) Represents
the proportionate amount of the total fair value of restricted stock grants
recognized by the Company as an expense in 2008 for financial accounting
purposes in accordance with FAS 123R.
Oustanding
Equity Awards
at
Fiscal Year End December 31, 2008
|
Option
Awards
|
Stock
Awards
|
||||||||
|
Name
|
Number
of securities underlying
unexercised options
(#)
Exercisable
|
Number
of securities underlying
unexercised options
(#)
Unexercisable
|
Option
exercise price
($)
|
Option
expiration date
|
Number
of shares or units of stock that have not vested
(#)
|
Market
value of shares or units of stock that have not vested
($)
|
|||
|
(5)
|
|||||||||
|
David
F. Carney
|
279,987
|
-
|
3.10
|
1/1/2012
(1)
|
-
|
-
|
|||
|
60,000
|
-
|
14.00
|
11/3/2013
(1)
|
-
|
-
|
||||
|
8,334
|
16,666
|
11.96
|
3/1/2017
(2)
|
-
|
-
|
||||
|
-
|
-
|
-
|
-
|
12,000
(4)
|
159,000
|
||||
|
Shaun
E. McAlmont
|
9,000
|
6,000
|
20.00
|
6/23/2020
(1)
|
-
|
-
|
|||
|
40,000
|
20,000
|
17.92
|
7/20/2016
(2)
|
-
|
-
|
||||
|
6,667
|
13,333
|
11.96
|
3/1/2017
(2)
|
-
|
-
|
||||
|
-
|
-
|
-
|
-
|
40,000
(3)
|
530,000
|
||||
|
-
|
-
|
-
|
-
|
10,000
(4)
|
132,500
|
||||
|
Scott
M. Shaw
|
235,500
|
-
|
3.10
|
1/1/2012
(1)
|
-
|
-
|
|||
|
50,000
|
-
|
14.00
|
11/3/2013
(1)
|
-
|
-
|
||||
|
5,000
|
10,000
|
11.96
|
3/1/2017
(2)
|
-
|
-
|
||||
|
-
|
-
|
-
|
-
|
40,000
(3)
|
530,000
|
||||
|
-
|
-
|
-
|
-
|
10,000
(4)
|
132,500
|
||||
|
Cesar
Ribeiro
|
32,000
|
8,000
|
25.00
|
6/7/2014
(1)
|
-
|
-
|
|||
|
15,000
|
-
|
14.19
|
12/9/2015
(2)
|
-
|
-
|
||||
|
16,667
|
8,333
|
17.92
|
7/20/2016
(2)
|
-
|
-
|
||||
|
8,334
|
16,666
|
11.96
|
3/1/2017
(2)
|
-
|
-
|
||||
|
-
|
-
|
-
|
-
|
40,000
(3)
|
530,000
|
||||
|
-
|
-
|
-
|
-
|
10,000
(4)
|
132,500
|
||||
__________
(1) Option
Awards granted to the Named Executive Officers were granted on the date 10 years
prior to the expiration date and vest ratably on the first through fifth year
anniversary of the grant date.
(2) Option
Awards granted to the Named Executive Officers were granted on the date 10 years
prior to the expiration date and vest ratably on the first through third year
anniversary of the grant date.
(3) Restricted
Stock Grants awarded to the Named Executive Officers were awarded on October 30,
2007 and vest ratably on the first through fifth year anniversary of the grant
date.
(4) Restricted
Stock Grants awarded to the Named Executive Officers were awarded on February
29, 2008 and vest ratably on the first through fifth year anniversary of the
grant date.
(5) All
equity award values are based on a December 31, 2008 closing stock price of
$13.25.
Option
Exercises and Stock Vested
as
of Fiscal Year End December 31, 2008
|
Stock
Awards
|
||||
|
|
Number
of Shares Acquired
on Vesting
(#)
|
Valued
Realized on
Vesting
($)
|
||
|
Name
|
(1)
|
|||
|
David
F. Carney
|
-
|
-
|
||
|
Shaun
E. McAlmont
|
10,000
|
134,700
|
||
|
Scott
M. Shaw
|
10,000
|
134,700
|
||
|
Cesar
Ribeiro
|
10,000
|
134,700
|
||
Potential Payments Upon
Termination and Change in Control
The
following table summarizes the value of the termination payments and benefits
that our named executive officers would receive if they had been Involuntarily
Terminated (as defined in their respective employment agreements), or resigned
following a Change in Control, as described below, on December 31,
2008. This table excludes vested account balances under our 401(k)
plan that is generally available to all of our employees:
Severance
Payments for Involuntary Termination
December
31, 2008
|
|
Aggregate
Severance Pay
|
Restricted
Stock
|
Stock
Options
|
Welfare
Benefits Continuation
|
Total
|
|
($)
|
($)
|
($)
|
($)
|
($)
|
|
|
Name
|
(1)
|
(1)
|
(2)
|
||
|
David
F. Carney
|
1,607,959
|
159,000
|
21,499
|
27,233
|
1,815,691
|
|
Shaun
E. McAlmont
|
828,373
|
662,500
|
17,200
|
25,375
|
1,533,448
|
|
Scott
M. Shaw
|
823,955
|
662,500
|
12,900
|
25,333
|
1,524,688
|
|
Cesar
Ribeiro
|
797,669
|
662,500
|
21,499
|
26,152
|
1,507,820
|
__________
(1) Upon
a Change in Control, all outstanding stock options granted and restricted stock
awarded by us or any of our affiliates to our named executive officers will
become fully vested and immediately exercisable on the date of the Change in
Control. The named executive officers would not receive the amounts
designated under the “Aggregate Severance Pay” and “Welfare Benefits
Continuation” columns.
(2) Includes
the employer portion of the premiums necessary to continue health care coverage
and the value of the continued use of an automobile and payment of associated
costs by us for one year from the date of termination.
Change In
Control. As
discussed above under “Employment-Related Arrangements”, upon a Change in
Control (as defined in our named executive officers employment agreements), we
(or our successor) will continue the employment of our named executive officers,
and they will continue performing services for us for a period of two years
commencing on the date of the Change in Control and ending on the second
anniversary thereof. Upon a Change in Control, all outstanding stock options
granted and restricted stock awarded by us or any of our affiliates to our named
executive officers will become fully vested and immediately exercisable on the
date of the Change in Control.
During a
30-day period commencing on the first anniversary of the date of the Change in
Control, each of our named executive officers will have the right to resign from
their employment with us (or our successor) for any reason and receive an amount
equal to (i) one times the amount of their base salary, as is then in effect,
and (ii) one times the average of their annual bonus paid to him for the two
years immediately prior to the year in which such resignation occurs. If,
however, such resignation constitutes an Involuntary Termination (as defined
below), our named executive officers will receive payments in accordance with an
Involuntary Termination.
Employment-Related
Arrangements
The
employment agreements for each of our named executive officers were amended on
January 14, 2009. The descriptions of the employment agreements below reflect
these amendments.
Employment Agreement with
David F. Carney
Employment
Period. The agreement provides that Mr. Carney
will serve as our Chairman and Chief Executive Officer through April 29, 2009
and as Executive Chairman from April 30, 2009 through December 31,
2010.
Compensation and
Benefits. We have agreed that we will compensate
Mr. Carney with a minimum annual base salary of $425,000. Mr. Carney will also
be eligible to earn an annual bonus for each calendar year during the term of
his employment, pursuant to the terms of our MIC Plan in effect for such
calendar year. For a description of the MIC Plan, please see page
10.
Mr.
Carney will also be included, to the extent eligible, in all of our employee
benefit plans, programs and arrangements (including, without limitation, any
plans, programs or arrangements providing for retirement benefits, profit
sharing, disability benefits, health and life insurance or vacation and paid
holidays) that are established for, or made available to, our senior
executives. In addition, we will furnish Mr. Carney with coverage by
our customary director and officer indemnification arrangements, subject to
applicable law.
Involuntary
Termination. In the event that during Mr. Carney’s
employment term, there is an “Involuntary Termination” (as defined below) of Mr.
Carney’s employment, we will pay him: (1) two times the amount of his base
salary, as is then in effect; (2) two times the average of his annual bonus; (3)
all outstanding reasonable travel and other business expenses incurred as of the
date of his termination; and (4) the employer portion of the premiums necessary
to continue his health care coverage for the earlier of (A) one year and (B) the
date on which he is covered under another group health plan. Mr. Carney will
also be entitled to (1) the continued use of an automobile and payment of
associated costs by us for the greater of (A) one year and (B) the remainder of
his employment term and (2) receive any other accrued compensation and benefits
otherwise payable to him as of the date of his termination. All the
aforementioned payments would be paid by us in a lump-sum amount no later than
30 days after the date of his termination. This lump sum payment may be deferred
for six months, if necessary, to comply with the American Jobs Creation Act of
2004. For purposes of Mr. Carney’s employment agreement, “Involuntary
Termination” means the termination of his employment (1) by us (or any successor
thereto) without “Cause” (as defined in his employment agreement) or (2) by Mr.
Carney for “Good Reason” (as defined in his employment agreement).
Termination for Cause, Death or
Disability; Resignation Other than for Good
Reason. In the event that during Mr. Carney’s
employment term, Mr. Carney’s employment is terminated by us for Cause, or Mr.
Carney resigns from his employment other than for Good Reason, we will pay him
(or his estate, if applicable) his accrued but unpaid base salary earned through
the date of termination, unreimbursed expenses, plus any other accrued but
unpaid employee benefits earned through the date of his termination, including,
without limitation, any annual bonus due but not yet paid for a completed
calendar year.
Change in
Control. Upon a Change in Control (as defined in
his employment agreement), we (or our successor) will continue the employment of
Mr. Carney, and Mr. Carney will continue performing services for us for a period
of two years commencing on the date of the Change in Control and ending on the
second anniversary thereof. Upon a Change in Control, all outstanding stock
options granted and restricted stock awarded by us or any of our affiliates to
Mr. Carney will become fully vested and immediately exercisable on the date of
the Change in Control.
During a
30-day period commencing on the first anniversary of the date of the Change in
Control, Mr. Carney will have the right to resign from his employment with us
(or our successor) for any reason and receive an amount equal to (i) one times
the amount of his base salary, as is then in effect, and (ii) one times the
average of his annual bonus paid to him for the two years immediately prior to
the year in which such resignation occurs. If, however, such resignation
constitutes an Involuntary Termination (as defined above), he will receive
payments in accordance with an Involuntary Termination. All of the
aforementioned payments would be paid by us in a lump-sum amount no later than
30 days after the date of his termination.
Reduction in
Payments. The employment agreement contains an
Internal Revenue Code, as amended (the “Code”) Section 280G “cusp” provision. In
the event that any payment or distribution by us to or for the benefit of Mr.
Carney 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 Code Section
4999, is less than the amount Mr. Carney 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. Carney if
already paid to him) to an amount that will equal three times his average “base
amount” less $1.00.
Noncompetition. Mr.
Carney is subject to a noncompetition restrictive covenant during the term of
his employment and for one year thereafter, although the covenant will not apply
if his employment is terminated due to an Involuntary Termination or he resigns
during the 30-day period commencing on the first anniversary of a Change in
Control.
Nonsolicitation. Mr.
Carney is subject to a nonsolicitation restrictive covenant of clients,
employees and key consultants during the term of this employment and for one
year thereafter.
Confidentiality. Mr.
Carney is subject to a confidentiality restrictive covenant of unlimited
duration.
Arbitration. Any
dispute or controversy arising under or in connection with Mr. Carney’s
employment agreement that cannot be mutually resolved by him and us will be
settled exclusively by arbitration in West Orange, New Jersey. The cost of the
arbitration will be borne by the parties in the manner determined by the
arbitrators.
Waiver and
Release. Our obligations under Mr. Carney’s
employment agreement are subject to Mr. Carney executing and delivering a waiver
and release (relating to his release of claims against us) in a form reasonably
and mutually agreed upon.
Employment Agreements with
Named Executive Officers other than Mr. Carney
The terms
of the Company’s employment agreements for Messrs. McAlmont, Shaw and Ribeiro
are identical to those set forth in Mr. Carney’s employment agreement described
above, except that (a) Mr. McAlmont will serve as President and Chief Operating
Officer through April 29, 2009 and as President and Chief Executive Officer from
April 30, 2009 through December 31, 2010 and will receive a minimum annual base
salary of $375,000; (b) Mr. Shaw will serve as Executive Vice President and
Chief Administrative Officer and will receive a minimum annual base salary of
$325,000; (c) Mr. Ribeiro will serve as Senior Vice President, Chief
Financial Officer and Treasurer, and will receive a minimum annual base salary
of $315,000; and (d) in the event of an Involuntary Termination of either of
Messrs. McAlmont’s, Shaw’s or Ribeiro’s employment term, each shall only be
entitled to receive a payment of one and one half times his base salary and
average annual bonus.
Director
Compensation
As
described more fully below, this chart summarizes the annual cash compensation
for the Company’s non-employee directors during 2008:
Director
Compensation
for
Fiscal Year End December 31, 2008 (1)
|
|
Fees
Earned or
Paid
in Cash
($)
|
Stock
Awards
($)
|
Total
($)
|
|
Name
|
(2)
|
||
|
Peter
S. Burgess
|
47,500
|
43,711
|
91,211
|
|
James
J. Burke, Jr.
|
38,000
|
43,711
|
81,711
|
|
Celia
H. Currin
|
36,000
|
52,219
|
88,219
|
|
Paul
E. Glaske
|
35,000
|
43,711
|
78,711
|
|
Charles
F. Kalmbach
|
16,500
|
6,667
|
23,167
|
|
Alexis
P. Michas
|
37,000
|
43,711
|
80,711
|
|
J.
Barry Morrow
|
33,000
|
52,219
|
85,219
|
|
Jerry
G. Rubenstein
|
34,000
|
43,711
|
77,711
|
__________
|
|
(1)
|
David
F. Carney does not receive any fees or stock awards for his service as a
director.
|
|
|
(2)
|
Represents
the compensation costs for financial reporting purposes for the year under
FAS 123R.
|
Compensation of Directors
The
Company currently pays each of its non-employee directors annual compensation of
$25,000 for services to the Company. In addition, each non-employee
director receives $1,000 per board meeting attended in person or by telephone.
The chairman of each committee of the board receives an additional $500 per
board meeting attended. Non-employee directors on committees of the
board will each receive an additional payment of $1,000 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 chairman will receive an
additional $10,000 annual retainer.
Non-employee
directors are also eligible to receive awards of restricted stock under the 2005
Non-Employee Directors Restricted Stock Plan (the Restricted Stock Plan) as
compensation for their services as directors.
Initial Grant of Restricted
Stock. Pursuant to the Restricted Stock Plan, each
non-employee director receives an initial award of shares of restricted stock
equal to $60,000 (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 on the
first day of the calendar month following the month in which such non-employee
director becomes a non-employee director.
Annual Grants of Restricted
Stock. The Restricted Stock Plan also provides that, as of the date
of each annual meeting, each non-employee director shall automatically receive
an award of shares of restricted stock equal to $40,000 (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. On May 2, 2008, 3,355 shares of common stock were awarded to
each of our seven non-employee directors. The per share fair market
value of the common stock on May 2, 2008 was $11.92. On
September 1, 2008, 3,992 shares were awarded to Director
Kalmbach. The per share fair market value of the common stock on
September 1, 2008 was $15.03.
All
awards of common stock under the Restricted Stock Plan vest ratably on the
first, second and third anniversary of the grant date; however, there is no
vesting period on the right to vote or the right to receive dividends on these
shares. As of December 31, 2008, there were a total of 84,954 shares
awarded under the Restricted Stock Plan of which 37,722 shares are
vested.
Audit Committee Report
The Audit
Committee assists the board of directors 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 management’s internal control assessment and upon
the effectiveness of those controls 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 financial statements as of December 31, 2008, 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 AU Section 380 (Communications with Audit
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 Independence Standards Board Standard No.
1, as amended (Independence
Discussions with Audit Committees) in which D&T affirmed its
independence from the Company. Further, the Audit Committee discussed
with D&T the firm’s independence and considered whether D&T’s provision
of non-audit services to the Company was compatible with maintaining D&T’s
independence. The Audit Committee concluded that D&T 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 board of directors
that the audited financial statements for the year ended December 31, 2008 be
included in the Company’s 2008 Annual Report on Form 10-K.
|
AUDIT
COMMITTEE
|
|
|
Peter
S. Burgess, Chairman
|
|
|
Celia
H. Currin
|
|
|
Charles
F. Kalmbach
|
|
|
Jerry
G. Rubenstein
|
|
|
Date: March
26, 2009
|
PROPOSAL NUMBER TWO—APPROVAL OF AN AMENDMENT TO THE
COMPANY’S
2005
NON-EMPLOYEE DIRECTORS RESTRICTED STOCK PLAN
At its
February 27, 2009 meeting, the board of directors unanimously approved, subject
to shareholder approval, amending the Company’s 2005 Non-Employee Directors
Restricted Stock Plan (the “Plan”) to increase the aggregate number of shares of
common stock available under the Plan to a total of 300,000
shares. The Plan was initially adopted in 2005 and, subject to
certain adjustments, authorized a maximum of 100,000 shares of our common stock
that may be issued for all purposes under the Plan.
As of
March 17, 2009, the Company had issued 84,954 shares of the 100,000 shares
authorized to date under the Plan. The Company estimates that an
additional 19,000 shares will be issued in 2009. Accordingly, without
this amendment, there would be insufficient authorized shares for all issuances
at the 2009 Annual Meeting.
Description
of the 2005 Non-Employee Directors Restricted Stock Plan, as
Amended
A
summary of the principal features of the Plan, as amended, is provided below,
but is qualified in its entirety by reference to the full text of the Plan that
is attached to this proxy statement as Annex A.
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 eight non-employee directors.
Administration. The
Plan will be administered by our compensation committee or such other committee
appointed by our board. Our compensation committee will have the authority to
interpret and construe the provisions of the Plan and to make all administrative
rules, procedures and determinations with respect to the 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 Plan.
Shares Reserved 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 Plan will be increased to an aggregate of 300,000
shares. Shares of our common stock issued under the Plan may be
either treasury shares or authorized and unissued shares. The Plan contains a
standard anti-dilution provision.
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. Subject to a deferral election, on the
first day of the month following the month in which a non-employee director
becomes a non-employee director, a non-employee director will receive a one-time
award of restricted shares of our common stock equal to $60,000 (based on the
fair market value of a share of our common stock on the date of grant) or such
other amount as our compensation committee may determine from time to
time.
Subject
to a deferral election, as of the date of each annual meeting of our
stockholders, each non-employee director will automatically receive an award of
restricted shares of our common stock equal to $40,000 (based on the fair market
value of a share of common stock on the date of grant). Notwithstanding the
foregoing sentence, 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.
An award
of restricted stock vests ratably on each of the first, second and third
anniversaries of the date of grant, subject to our compensation committee's
authority to accelerate the vesting of the award upon a change in
control. 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. Each non-employee director will be
given the opportunity to make an irrevocable election to defer under our
deferral plan (described in detail below) 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 31 of the taxable year
prior to the year in which the applicable award of restricted stock would
otherwise be made to such director.
Where 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. Whereas a restricted
stock award results in the immediate distribution of shares of our common stock,
which remain subject to applicable vesting and transfer restrictions, a
restricted stock unit award is a contractual right to receive shares of our
common stock at a later date upon the satisfaction of certain vesting and
settlement conditions.
The
non-employee director will receive an award of these restricted stock units on
the same date that the award of restricted stock subject to the deferral
election would have been granted. An award of restricted stock units will vest
at a rate of 331/3% on each of the first, second
and third anniversaries of the date of grant, subject to our compensation
committee's authority to accelerate the vesting of the award upon a change in
control. Upon an award of restricted stock units, or portion thereof, becoming
vested, no shares of common stock will be issued to the non-employee director.
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 accordance with the terms and conditions of our deferral
plan. In addition, upon an award of restricted stock units, or portion thereof,
becoming vested, 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 stockholder in
our company with respect to restricted stock units held by him until shares of
our common stock underlying such units are distributed.
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. 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 stockholder 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
it was initially approved by stockholders, except with respect to awards that
are then outstanding.
U.S. Federal Tax
Consequences. A non-employee director will not recognize
taxable income upon the grant of restricted stock or restricted stock units.
Instead, the non-employee director will recognize ordinary income at the time of
vesting equal to the fair market value of the shares (or cash) received minus
any amounts the director paid. Any subsequent gain or loss will be capital gain
or loss, long-term if the shares have been held for more than one year. For
restricted stock only, 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.
The
foregoing is not to be considered as tax advice to any person who may be a
participant, and any such persons are advised to consult their own tax counsel.
The foregoing is intended to be a general discussion of U.S. Federal tax
consequences, and does not cover other aspects of an individual’s unique tax
situation, such as the tax consequences of deferred compensation or state and
local taxes.
Other
Information. As of March 24, 2009, the closing price of a
share of our common stock was $17.24.
Benefits of the Company’s
2005 Non-Employee Directors Restricted Stock Plan
The table
below shows restricted stock granted in 2008 to all non-employee directors as a
group. None of the named executive officers or employees is eligible
to participate in the Plan. The grants described in this table are
not necessarily indicative of awards that we may grant in the
future.
|
|
Dollar
Value
|
Number
of Shares
|
|
Name
and Position
|
($)
|
|
|
Non-Employee
Director Group
|
339,941
|
27,477
|
The
board of directors recommends a vote FOR amending of the
2005 Non-Employee Directors Restricted Stock Plan.
PROPOSAL NUMBER THREE—RATIFICATION OF APPOINTMENT
OF
INDEPENDENT
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 year ending
December 31, 2009. 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
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 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 2009 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 to Deloitte & Touche LLP during the years
ended December 31, 2008 and 2007:
|
Fee
Category
|
2008
|
2007
|
||||||
|
Audit
and Audit Related Fees
|
$ | 768,550 | $ | 722,800 | ||||
|
Tax
Fees
|
137,337 | 95,100 | ||||||
|
All
Other Fees
|
392,800 | 25,700 | ||||||
|
Total
Fees
|
$ | 1,298,727 | $ | 843,600 | ||||
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 management’s report on 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 consisted of
professional services rendered in connection with the Company’s 401(k) and
pension plan audits. In 2008, such fees also included professional
services rendered in connection with two registration statements on Form S-3,
filed by the Company with the SEC during 2008 and consultation regarding
the acquisition of Baran Institute of Technology, Inc.
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 meeting will be required to ratify the
appointment of Deloitte & Touche LLP as the Company’s independent registered
public accounting firm for 2009.
The
board of directors recommends a vote FOR the ratification
of the appointment of Deloitte & Touche LLP as the Company’s independent
registered public accounting firm for 2009.
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, 2008,
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-K 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 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. 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 board
of directors has adopted corporate governance guidelines, which include
guidelines for determining director independence, director responsibilities,
director access to management and independent advisors, and director stock
ownership guidelines. The board of directors has determined that the following
six directors satisfy the Nasdaq Global Market’s independence requirements:
Messrs. Burgess, Glaske, Kalmbach, Morrow, Rubenstein and Ms.
Currin.
The board
of directors has adopted an Integrity Assurance Program – A Code of Business
Ethics and 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 Global Market
rules requiring a code of ethics for a company’s directors, officers and
employees. A copy of the Integrity Assurance Program – A Code of Business Ethics
and Conduct is posted on our website at www.lincolnedu.com. The Audit
Committee must approve any requests for amendments to or waivers from the
Integrity Assurance Program 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 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 (the “Committee”) written charter, the 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 obligation from the Company; and competing with the
Company.
On May
12, 2008, we repurchased from Five Mile River Capital Partners and Steven W.
Hart an aggregate 100,000 shares of our common stock for $11.25 per share for a
total cost of $1.1 million. Hart Capital LLC is the managing member
of Five Mile River Capital Partners LLC, our second largest
stockholder. Steven W. Hart is the owner and president of Hart
Capital LLC and is a former member of our board of directors. At the
time of the transaction Hart Capital beneficially owned, through Five Mile River
Capital LLC, 8.3% of our outstanding shares of common stock.
On
October 15, 2007, we entered into a Separation and Release Agreement with
Lawrence E. Brown, our former Vice Chairman. Under this agreement Mr.
Brown’s employment terminated as of the close of business on October 31,
2007. For a period of 14 months following the date of separation of
employment, Mr. Brown continued to provide transitional services to us, not to
exceed ten hours per month. In consideration for a release of claims,
we paid Mr. Brown a lump sum cash payment of $0.5 million and reimbursed Mr.
Brown for the employer-portion of the premiums due for continuation of coverage
under COBRA through December 31, 2008. Mr. Brown was entitled to the
use of his automobile and reimbursement of associated costs by us through
December 31, 2008. In addition, pursuant to the terms of the
agreement, Mr. Brown agreed to be subject to certain restrictive covenants,
which, among other things, prohibited him for the duration of 14 months
following the date of separation of employment, from (i) competing against us
and (ii) soliciting our or any of our affiliates’ or subsidiaries’ employees,
consultants, clients or customers through December 31, 2008.
SHAREHOLDER PROPOSALS FOR THE 2010 ANNUAL MEETING OF
SHAREHOLDERS
Shareholder
proposals that are intended to be presented at the 2010 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 27, 2009 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 board of directors 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
28, 2009 and November 27, 2009 based on this year’s notice mailing date of March
27, 2009).
COMMUNICATING WITH THE BOARD OF DIRECTORS
You may
contact any non-employee director, or the entire board, at any time. Your
communication should 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, or any board member as appropriate, depending on
the facts and circumstances outlined in the communication. Certain items that
are unrelated to the duties and responsibilities of the board 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
stockholders give contrary instructions, only one copy of our proxy statement or
annual report may be sent to multiple stockholders 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, telephone (973) 736-9340. If you
want 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 should contact your bank, broker or other record
holder, or you may contact us at the above address or telephone
number.
OTHER INFORMATION
Proxy
authorizations submitted via the Internet must be received by 5:00 p.m.
(Eastern Time) on April 29, 2009. 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
|
|
|
/s/
Kenneth M. Swisstack
|
|
|
Kenneth
M. Swisstack
|
|
|
Corporate
Secretary
|
|
|
West
Orange, New Jersey
|
|
|
March
27, 2009
|
Annex A
LINCOLN
EDUCATIONAL SERVICES CORPORATION
2005
NON-EMPLOYEE DIRECTORS RESTRICTED STOCK PLAN
|
1.
|
Purpose
of the Plan
|
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 a “Change in
Control” as defined in the Company’s 2005 Long-Term Incentive Plan.
“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 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 National 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 National Market, the mean between the bid and
offered prices as quoted by Nasdaq for such date, provided that if it is
determined that the fair market value is not properly reflected by such Nasdaq
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 2005 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 domestic or foreign 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 domestic or foreign corporation or other
entity in which the Company, directly or indirectly, has an equity or similar
interest and which the Board designates as a Subsidiary for purposes of the
Plan.
“Vesting
Date” has the meaning assigned to such term in Section 8(c)
hereof.
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(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.
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3.
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Administration
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(a)
|
Authority. Subject
to the provisions of Section 12 hereof, the Committee shall have authority
to interpret the provisions of the Plan, to establish such rules and
procedures as may be necessary or advisable to administer the Plan and to
make all determinations necessary or advisable for the administration of
the Plan, including, without limitation, factual and legal determinations;
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 be final,
binding and conclusive on all
parties.
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(b)
|
Delegation. The
Committee may designate one or more employees of the Company to carry out
the day-to-day aspects of the Committee’s responsibilities under such
conditions as it may set.
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4.
|
Eligibility
|
Awards
under the Plan shall be granted pursuant to the provisions hereof to persons who
are Non-Employee Directors.
|
5.
|
Plan
Limit
|
Subject
to Section 9(b) hereof, the Company is authorized to issue up to 300,000 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.
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6.
|
Awards
in General
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(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.
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(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.
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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.
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(a)
|
Initial Grant of
Restricted
Stock. Subject to the provisions of Section 8, each
Non-Employee Director shall receive an Award of shares of Restricted Stock
equal to $60,000 (based on the Fair Market Value of a share of Common
Stock on the Date of Grant) or such other amount as the Committee may
determine from time to time for service as a director of the Company on
the first day of the calendar month following the month in which such
Non-Employee Director becomes a Non-Employee
Director.
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(b)
|
Annual Grants of
Restricted
Stock. Subject to the provisions of Sections 7 and 8, as
of the date of each Annual Meeting commencing in 2006, each Non-Employee
Director shall automatically receive an Award of shares of Restricted
Stock equal to $40,000 (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, provided further that
if a person is elected, appointed or otherwise becomes a Non-Employee
Director during a period of 60 days prior to the Annual Meeting in any
year, then such Non-Employee Director shall not receive any Award of
Restricted Stock pursuant to this Section 7(b) for such
year.
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(c)
|
Vesting. An
Award of Restricted Stock shall vest and become nonforfeitable at a rate
of 33 1/3% on each of the first, second and third anniversaries 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).
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(d)
|
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.
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(e)
|
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(c) but, in no event, prior to the
expiration of a period of six (6) months from the Date of
Grant.
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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.
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(a)
|
Deferral
Election. Notwithstanding any provision of Section 7,
each Non-Employee Director shall 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. 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 31 of the
taxable year prior to the year in which the applicable Award of Restricted
Stock is granted to such Non-Employee
Director.
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(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.
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(c)
|
Vesting. An
Award of Restricted Stock Units shall vest and become nonforfeitable at a
rate of 33 1/3% on each of the first, second and third anniversaries 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).
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(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.
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|
(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.
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(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.
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(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.
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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 its
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 Common Stock or the rights thereof or which are
convertible into or exchangeable for 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.
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(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 hereof may be equitably adjusted in the sole
discretion of the Committee in the event of a stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, extraordinary
dividend, split-up, spin-off, combination, exchange of shares, warrants or
rights offering to purchase Common Stock at a price substantially below
Fair Market Value or other similar corporate event affecting the 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 Awards may be equitably
adjusted (including by payment of cash to a Non-Employee Director) in the
sole discretion of the Committee in order to preserve the benefits or
potential benefits intended to be made available to Non-Employee Directors
granted Awards. Such adjustments shall be made by the
Committee, in its sole discretion, whose determination as to what
adjustments shall be made, and the extent thereof, shall be
final. Unless otherwise determined by the Committee, such
adjusted Awards shall be subject to the same restrictions to which the
underlying Award is subject.
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|
10.
|
Miscellaneous
|
|
|
(a)
|
Tax
Withholding. The Company shall require as a condition to
delivery of shares of Common Stock that the Non-Employee Director remit an
amount sufficient to satisfy all applicable tax withholding requirements
(if any) and any or all indebtedness or other obligation of the
Non-Employee Director to the Company or any of its
Subsidiaries.
|
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(b)
|
No Right to 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.
|
|
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(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. Notwithstanding anything contained in the Plan or any
Award Document under the Plan to the contrary, if the consummation of any
transaction under the Plan, or the taking of any action by the Committee
in connection with a Change in Control of the Company, would result in the
possible imposition of liability on a Non-Employee Director pursuant to
Section 16(b) of the Exchange Act, the Committee shall have the right, in
its sole discretion, but shall not be obligated, to defer such transaction
or the effectiveness of such action to the extent necessary to avoid such
liability, but in no event for a period longer than 180
days.
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|
(d)
|
Securities Law
Restrictions. 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)
|
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.
|
|
|
(f)
|
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.
|
|
|
(g)
|
Section 409A of the
Code. If any provision of the Plan or an Award Document
contravenes any regulations or Department of Treasury guidance promulgated
under Section 409A of the Code or could cause an Award to be subject to
the interest and penalties under Section 409A of the Code, such provision
of the Plan or any Award Document shall be modified to maintain, to the
maximum extent practicable, the original intent of the applicable
provision without violating the provisions of Section 409A of the
Code.
|
|
11.
|
Term
of the Plan
|
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
|
The Plan
may be terminated and may be modified or amended by the Board at any time and
from time-to-time; provided,
however, that (i) no modification or amendment shall be effective without
stockholder approval if such approval is required by law or under the rules of
Nasdaq or the stock exchange on which the shares are listed, and (ii) no such
termination, modification, or amendment of the Plan shall adversely alter or
affect the terms of any then outstanding Awards previously granted hereunder
without the consent of the holder thereof. 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
applicable tax laws, securities laws, accounting rules and other applicable
laws, rules and regulations or (b) to ensure that an Award is not subject to
interest and penalties under Section 409A of the Code.
A-5
ANNUAL
MEETING OF SHAREHOLDERS OF
LINCOLN
EDUCATIONAL SERVICES CORPORATION
April
30, 2009
Please
date, sign and mail your proxy card in the
envelope
provided as soon as possible.
v FOLD
AND DETACH HERE AND READ THE REVERSE SIDE v
PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x
The Board
of Directors recommends a vote FOR Items 1, 2 and 3.
|
1.
|
Election
of Directors:
|
|
o Peter S.
Burgess
|
o James J. Burke,
Jr.
|
||
|
o David F.
Carney
|
o Celia H.
Currin
|
||
|
o Paul E.
Glaske
|
o Charles F.
Kalmbach
|
||
|
o Shaun E.
McAlmont
|
o Alexis P.
Michas
|
||
|
o J. Barry
Morrow
|
o Jerry G.
Rubenstein
|
|
FOR
ALL
NOMINEES
|
WITHHOLD
AUTHORITY
|
FOR
ALL EXCEPT
(See
instructions below)
|
|
|
o
|
o
|
o
|
|
INSTRUCTION:
|
|
To withhold
authority to vote for any individual nominee(s), mark “FOR
ALL EXCEPT” and fill in the square next to each nominee you wish to
withhold, as shown here: x
|
To change the address on
your account, please check the box at 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.
|
Amendment
of the Company’s 2005 Non-Employee Directors Restricted Stock
Plan.
|
|
FOR
|
AGAINST
|
ABSTAIN
|
|
|
o
|
o
|
o
|
|
3.
|
Ratification
of the appointment of Deloitte & Touche LLP to serve as the Company’s
independent registered public accounting firm for the fiscal year ending
December 31, 2009.
|
|
FOR
|
AGAINST
|
ABSTAIN
|
|
|
o
|
o
|
o
|
|
4.
|
To
transact such other business as may properly come before the Annual
Meeting or any adjournment(s) or postponement(s) thereof and as to which
the undersigned hereby confers discretionary authority to the
proxies.
|
CHECK
HERE IF YOU PLAN TO ATTEND THE MEETING o
|
Signature
of Shareholder
|
Date:
|
Signature
of Shareholder
|
Date:
|
|
Note:
|
Please
sign exactly as your name appears hereon. When shares are held by joint
owners, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in
partnership name by authorized
person.
|
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 David F. Carney and Cesar
Ribeiro, 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 Thursday, April 30, 2009, at 10:00 a.m., local time,
at the Wilshire Grand Hotel, 350 Pleasant Valley Way, West Orange, New Jersey
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 THE FOREGOING PROPOSALS AND
OTHERWISE IN THE DISCRETION OF THE PROXIES AT THE ANNUAL MEETING OR ANY
ADJOURNMENT(S) OR POSTPONEMENT(S) THEREOF.