Blueprint
UNITED STATES
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SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
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SCHEDULE 14A
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Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.
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Filed by the Registrant ☒
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Filed by a Party other than the
Registrant ☐
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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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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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National American University Holdings, Inc.
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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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No fee required.
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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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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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5301 Mt. Rushmore Road
Rapid City, South Dakota 57701
September 1, 2017
Dear Stockholder:
You
are cordially invited to attend the 2017 Annual Meeting of
Stockholders of National American University Holdings, Inc. to
be held at the Holiday Inn-Rushmore Plaza, 505 North Fifth Street,
Rapid City, South Dakota 57701, commencing at 9:00 a.m.
Mountain Time on Tuesday, October 3, 2017.
The
accompanying Notice of Annual Meeting and the proxy statement that
follow describe the matters to be considered and voted upon at the
Annual Meeting. At the Annual Meeting, I will also report on the
progress of our business during the past year, and you will have an
opportunity to ask questions.
I
hope that you will be able to attend the Annual Meeting. It is
important that your shares be represented at the Annual Meeting.
Whether or not you plan to attend the meeting, we urge you to vote
your shares via the toll-free number provided or over the Internet,
as described in the enclosed materials. You may also mark,
sign and date the enclosed proxy card and return it in the envelope
provided.
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Sincerely,
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Ronald L. Shape
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President and Chief Executive Officer
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5301 Mt. Rushmore Road
Rapid City, South Dakota 57701
NOTICE OF 2017 ANNUAL MEETING OF STOCKHOLDERS
Date and Time:
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Tuesday, October 3, 2017, at 9:00 a.m., Mountain
Time
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Place:
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Holiday Inn-Rushmore Plaza, 505 North Fifth Street, Rapid City,
South Dakota 57701
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Items of Business:
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1.
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To elect the nine persons named in the accompanying proxy statement
to serve as directors on our Board of Directors;
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2.
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To approve our named executive officers’ compensation in an
advisory vote;
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3.
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To ratify the appointment of Deloitte & Touche LLP as our
independent registered public accounting firm for the fiscal year
ending May 31, 2018; and
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4.
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To transact such other business as may properly come before the
annual meeting or any postponement or adjournment of the
meeting.
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Record Date:
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You may vote if you were a stockholder of record of National
American University Holdings, Inc. as of the close of business
on August 8, 2017.
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Proxy Voting:
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Your vote is important. Regardless of the number of shares you own
and whether or not you plan to attend the annual meeting in person,
we urge you to read the proxy statement and vote using one of the
methods listed below:
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1.
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Attending the annual meeting and voting in person;
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2.
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By visiting the web site at www.proxyvote.com, 24 hours a day,
seven days a week, through 11:59 p.m. Eastern Time (9:59 p.m.
Mountain Time) on October 2, 2017;
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3.
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By calling (within the U.S. or Canada) toll-free 1-800-690-6903, 24
hours a day, seven days a week, through 11:59 p.m. Eastern Time
(9:59 p.m. Mountain Time) on October 2, 2017; or
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4.
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By marking, dating, signing and returning the proxy card in the
postage-paid envelope included in printed proxy
materials.
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You may revoke your proxy at any time prior to the annual meeting
and delivery of your proxy will not affect your right to vote in
person if you attend the meeting.
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By Order of the Board of Directors
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Rapid City, South Dakota
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Ronald L. Shape
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September 1, 2017
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President and Chief Executive Officer
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TABLE OF CONTENTS
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PAGE
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GENERAL INFORMATION
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1
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Questions and Answers About the Annual Meeting AND
VOTING
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1
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Questions and Answers About Proxy Solicitation
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4
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Additional Information
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4
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CORPORATE GOVERNANCE
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4
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Director
Independence
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5
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Board’s
Role in Risk Oversight
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5
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Board
Leadership Structure
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5
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Certain
Relationships and Related Transactions
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5
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Board
Committees and Their Functions
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6
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Audit
Committee
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6
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Compensation
Committee
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6
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Board
Meetings and Attendance
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Director
Nomination Process
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7
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Communications
with the Board of Directors
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8
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PROPOSAL NUMBER 1—ELECTION OF DIRECTORS
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8
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General
Information
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8
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Board
Voting Recommendation
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9
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Nominees
and Directors
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9
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EXECUTIVE OFFICERS
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11
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EXECUTIVE AND DIRECTOR COMPENSATION
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13
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Summary
Compensation Table
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15
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Discussion
of Executive Compensation Decisions
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16
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Outstanding
Equity Awards at Fiscal Year-End
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19
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Employment
Agreements
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Director
Compensation and Benefits
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Beneficial
Ownership of Principal Stockholders, Directors and
Management
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Section 16(a) Beneficial
Ownership Reporting Compliance
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Audit
Committee Report
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PROPOSAL NUMBER 2—STOCKHOLDER ADVISORY VOTE TO APPROVE
EXECUTIVE COMPENSATION
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Board
Voting Recommendation
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PROPOSAL NUMBER 3—RATIFICATION OF APPOINTMENT OF OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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Independent
Registered Public Accounting Firm Fees and Services
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Audit
Committee Pre-Approval Policies and Procedures
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Board
Voting Recommendation
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OTHER BUSINESS
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DELIVERY OF PROXY MATERIALS TO HOUSEHOLDS
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STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
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NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
5301 Mt. Rushmore Road
Rapid City, South Dakota 57701
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS—OCTOBER 3, 2017
GENERAL INFORMATION
This
proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the “Board”) of
National American University Holdings, Inc. (the
“Company,” “NAUH,” “we,”
“us,” or “our”) to be voted at our 2017
Annual Meeting of Stockholders (the “Annual Meeting”)
to be held on Tuesday, October 3, 2017, at 9:00 a.m. Mountain
Time, at the Holiday Inn-Rushmore Plaza, 505 North Fifth Street,
Rapid City, South Dakota 57701, or at any postponement or
adjournment of the Annual Meeting. We are first making the
proxy statement and form of proxy card available to our
stockholders on or about September 1, 2017.
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING AND
VOTING
What is the purpose of the Annual Meeting?
At
the Annual Meeting, our stockholders will vote on the following
items of business:
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Elect
the nine nominees named in the proxy statement to the Board, each
of whom will hold office until the next annual meeting of
stockholders and until his or her successor is elected and
qualified or until his or her earlier resignation or
removal;
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Approve
by an advisory vote the compensation of our named executive
officers;
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Ratify
the appointment of Deloitte & Touche LLP as our independent
registered public accounting firm for the fiscal year ending
May 31, 2018; and
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Conduct
such other business as may properly come before the Annual Meeting.
Presently, management is not aware of any other business to come
before the Annual Meeting.
In
addition, management will report on the performance of our business
and respond to questions from stockholders.
Who is entitled to vote at the Annual Meeting?
In
order to vote at the Annual Meeting, you must be a stockholder of
record of the Company as of August 8, 2017, the record date for the
Annual Meeting. You have one vote for each share of our common
stock you own, and you can vote those shares for each item of
business to be addressed at the Annual Meeting. If your shares are
held in “street name” (that is, through a brokerage
firm, bank or other nominee), you will receive instructions from
the stockholder of record that you must follow in order for your
shares to be voted as you choose.
How many shares must be present to hold a valid Annual
Meeting?
For
us to hold a valid Annual Meeting, we must have a quorum, which
means that a majority of the outstanding shares of our common stock
that are entitled to vote are present at the Annual Meeting. As of
the record date, there were 24,231,071 shares of our common stock
outstanding and entitled to vote. There are no other classes of
capital stock outstanding. Your shares will be counted as present
at the Annual Meeting if you:
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Vote
via the Internet or by telephone;
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Properly
submit a proxy card (even if you do not provide voting
instructions); or
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Attend
the Annual Meeting and vote in person.
How many votes are required to approve an item of
business?
Assuming
a quorum is present at the Annual Meeting:
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The
election to the Board of each nominee for director requires the
affirmative vote of a plurality of the shares of common stock
present in person or by proxy and entitled to vote at the Annual
Meeting.
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The
approval, in a non-binding advisory vote, of the compensation paid
to our named executive officers as set forth in this Proxy
Statement requires the affirmative vote of a majority of the shares
of common stock present in person or by proxy and entitled to vote
on the proposal at the Annual Meeting. Although the advisory vote
on compensation paid to our named executive officers is
non-binding, our Board will review the result of the vote and will
consider it in making a determination concerning executive
compensation in the future.
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The
ratification of the appointment of Deloitte & Touche LLP as our
independent registered public accounting firm for the fiscal
year ending May 31, 2018 requires the affirmative vote of a
majority of the shares of common stock present in person or by
proxy and entitled to vote on the proposal at the Annual
Meeting.
How do I vote my shares if they are held in nominee “street
name,” such as by a brokerage firm, bank or other
nominee?
If
on the record date you hold shares of our common stock in an
account with a brokerage firm, bank, or other nominee, then you are
a beneficial owner of the shares and hold such shares in
“street name.” As a beneficial owner, you have the
right to direct your broker, bank, or other nominee on how to vote
your shares. The nominee that holds your shares is considered the
stockholder of record for purposes of voting at the Annual Meeting.
Because you are not the stockholder of record, you may not vote
your shares in person at the Annual Meeting unless you bring a
proxy from your broker, bank or other nominee to the Annual
Meeting.
Whether
or not you plan to attend the Annual Meeting, we urge you to vote
by following the voting instructions provided to you by your
nominee to ensure that your vote is counted. If you do not provide
voting instructions to your nominee, your nominee will not be
permitted to vote your shares in its discretion on all of the items
of business, except for the ratification of the appointment of
Deloitte & Touche LLP as our independent registered
public accounting firm for the current fiscal year. In the past, if
you held your shares in “street name” and you did not
indicate how you wanted your shares voted in the election of
directors, your bank or broker was allowed to vote those shares on
your behalf on the election of directors as they thought
appropriate. Recent changes in regulation took away the ability of
your bank or broker to vote your uninstructed shares in the
election of directors on a discretionary basis. Therefore, it is
particularly important for street name holders to instruct their
brokers or banks as to how they wish to vote their
shares.
How will abstentions and broker non-votes affect the quorum and
voting?
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If
you withhold your vote on the election of directors or abstain from
voting on the other proposals, you will still be considered present
at the Annual Meeting for purposes of determining a
quorum.
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If
you withhold your vote from the election of a director nominee,
this will reduce the number of votes cast for that
nominee.
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If
you abstain from voting on a proposal, other than on the election
of directors, you will be deemed to have voted against that
proposal.
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If
you do not vote your shares that are held in nominee “street
name,” such as by a brokerage firm, and your nominee does not
have discretionary power to vote your shares on a particular
matter, the failure of the nominee to vote the shares on that
matter is called a “broker non-vote.” Broker non-votes
will be considered present at the Annual Meeting for purposes of
determining a quorum. Broker non-votes, however, will not be
counted in determining the number of shares voted for or against
the matter.
How does the Board recommend that I vote?
The
Board recommends that you vote:
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FOR
the election of each of the nine director nominees named in this
proxy statement;
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FOR
the approval by an advisory vote of the compensation of our named
executive officers; and
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FOR
the ratification of the appointment of Deloitte & Touche LLP as
our independent registered public accounting firm for the
fiscal year ending May 31, 2018.
How do I vote?
If
you are a stockholder of record (that is, if your shares are owned
directly in your name and not in “street name” through
a broker), you may vote in any of the following ways:
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By
attending the Annual Meeting and voting in person;
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By
voting by proxy over the Internet or calling toll-free (within the
U.S. or Canada) by following the instructions provided in the proxy
materials; or
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By
marking, dating, signing and returning the proxy card.
Even
if you plan to attend the Annual Meeting, we recommend that you
also submit your proxy so that your vote will be counted if you
later decide not to attend the meeting.
If
you wish to vote by Internet or telephone, you must do so before
11:59 p.m. Eastern Time (9:59 p.m. Mountain Time) on
October 2, 2017. After that time, Internet and telephone voting
will not be permitted, and a stockholder wishing to vote, or revoke
an earlier proxy, must submit a signed proxy card or vote in
person.
“Street
name” stockholders who wish to vote at the Annual Meeting
will need to obtain a proxy form from the institution that holds
their shares of record.
How are my voting instructions carried out?
If
you vote by telephone or through the Internet, and the Company
receives it in the time provided above, the persons named as
proxies will vote your shares in the manner that you specify. Proxy
cards that are properly executed, duly returned and not revoked
will be voted in the manner specified. If a proxy card is properly
executed but does not specify any or all choices for each proposal,
the proxy will be voted as follows:
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FOR
the election of the nine nominees for director as described in this
proxy statement;
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FOR
the approval by an advisory vote of the compensation of our named
executive officers;
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FOR
the ratification of the appointment of Deloitte & Touche LLP as
our independent registered public accounting firm for the
fiscal year ending May 31, 2018; and
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In
the discretion of the persons named in the proxy, as to such other
matters as may be properly come before the Annual
Meeting.
What if I change my mind after I vote via proxy?
You
may revoke your proxy at any time before your shares are voted at
the Annual Meeting. If you are a stockholder of record, you can
change your vote by:
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Submitting
a later-dated proxy until 11:59 p.m. Eastern Time
(9:59 p.m. Mountain Time) on October
2, 2017;
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Voting
in person at the Annual Meeting; or
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Providing
written notice revoking your proxy vote to our Corporate Secretary
at our principal office prior to the Annual Meeting.
If
on the record date you held shares of our common stock in an
account with a brokerage firm, bank, or other nominee, then you
must instruct the nominee that holds your shares of your desire to
change or revoke your voting instructions.
QUESTIONS AND ANSWERS ABOUT PROXY SOLICITATION
How are proxies solicited?
We
will request that brokerage firms, banks, other custodians,
nominees, fiduciaries and other representatives of stockholders
forward proxy materials and annual reports to the beneficial owners
of our common stock. We may solicit proxies by mail, in person, by
telephone, through electronic transmission and by facsimile
transmission. Our directors, officers and employees will not
receive additional compensation for soliciting stockholder
proxies.
Who will pay for the cost of soliciting proxies?
We
will pay all of the costs of preparing, printing and distributing
proxy materials. We will reimburse brokerage firms, banks and other
representatives of stockholders for reasonable expenses incurred by
them in sending proxy materials and annual reports to the
beneficial owners of our common stock.
ADDITIONAL INFORMATION
Where can I find additional information about National American
University Holdings, Inc.?
Our reports on Forms 10-K, 10-Q and 8-K, and other
publicly available information should be consulted for other
important information about us. You can also find additional
information about us on our website at www.national.edu.
CORPORATE GOVERNANCE
Our
Board is elected by our stockholders to oversee our business and
affairs. The Board monitors and evaluates our business performance
through regular communication with our chief executive officer and
by holding Board meetings and Board committee
meetings.
The Board values effective corporate governance
and adherence to high legal and ethical standards. We have adopted
the Code of Business Conduct and Ethics (the “Code of
Conduct”), which is applicable to our employees, officers and
members of our Board. This Code of Conduct is intended to
deter wrongdoing and to promote honest and ethical conduct, full,
fair, accurate, timely and understandable disclosure in reports and
documents that we file with, or submit to, the Securities and
Exchange Commission (the “SEC”), compliance with
applicable laws, rules and regulations, prompt internal reporting
of violations of the Code of
Conduct, accountability for any violation of the Code of Conduct,
and a culture of compliance and ethics. Our Code of Conduct is posted on our website
at www.national.edu
under the “Investor
Relations” link. A paper copy is available to stockholders
free of charge upon request to our Corporate
Secretary.
Director Independence
We
adhere to the director independence requirements under The NASDAQ
Stock Market LLC (“NASDAQ”) corporate governance rules.
For a director to be considered independent under NASDAQ rules, the
Board must affirmatively determine that a director or director
nominee does not have a relationship that, in the opinion of the
Board, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. Under these
director independence standards, the Board has determined that each
of current directors Dr. Crane, Dr. Saban, Mr. Halbert, Mr. Berzina
and Mr. Rowan is independent. The Board based these determinations
primarily on a review of the responses of the directors to
questions regarding employment and compensation history,
affiliations, family and other relationships, and on discussions
with our directors.
Board’s Role in Risk Oversight
Our
Board is responsible for oversight of our risks assessment and
management process. The Board executes this oversight
responsibility directly and through the standing committees of the
Board. The Board and its committees regularly review and discuss
with management our material strategic, operational, financial,
regulatory compliance, and compensation risks.
The
audit committee performs a central oversight role with respect to
financial and compliance risks. The audit committee reviews and
assesses the qualitative aspects of financial reporting, process to
manage financial and financial reporting risk, and compliance with
applicable legal, ethical and regulatory requirements. The audit
committee regularly reports its findings to the Board. The
compensation committee reviews and discusses with management the
impact of our compensation policies and practices on risk taking
within our organization. The Board dissolved the corporate
governance and nominating committee on October 29, 2012 but, prior
to its dissolution, the corporate governance and nominating
committee assisted the Board in overseeing management’s
processes for the assessment and management of non-financial risks
and the steps that management has taken to monitor and control
exposure to such risks. The Board has taken the responsibility of
overseeing these risks since the dissolution of the corporate
governance and nominating committee.
Board Leadership Structure
Our
Board elects its Chairman and appoints the Company’s Chief
Executive Officer according to what it determines is best for the
Company and its stockholders at any given time. The offices of
Chairman and Chief Executive Officer are currently held separately,
which the Board has determined is in the best interests of the
Company and its stockholders at this particular time. However, the
Board does not believe there should be a fixed rule as to whether
the offices of Chairman and Chief Executive Officer should be
vested in the same person or two different people, or whether the
Chairman should be an employee of the Company or should be elected
from among the non-employee directors. The needs of the Company and
the individuals available to fulfill these roles may dictate
different outcomes at different times, and the Board believes that
retaining flexibility in these decisions is in the best interest of
the Company and its stockholders.
Certain Relationships and Related Transactions
Our
Code of Conduct requires our employees to avoid, wherever possible,
all related party transactions that could result in actual or
potential conflicts of interest. The employees also are responsible
to disclose to our compliance officer any actual or perceived
conflict of interest. Related party transactions with respect to
companies like ours are defined under the SEC rules. A conflict of
interest situation can arise when a person takes actions or has
interests that may make it difficult to perform his or her work
objectively and effectively. Conflicts of interest may also arise
if a person, or a member of his or her family, receives improper
personal benefits as a result of his or her position. Related party
transactions are not permitted without the prior consent of our
audit committee, or other independent committee of our Board if it
is inappropriate for our audit committee to review such transaction
due to a conflict of interest. In approving or rejecting the
proposed transaction, our audit committee will consider the facts
and circumstances available and deemed relevant to the committee,
including the risks, costs and benefits to us, the terms of the
transaction, the availability of other sources for comparable
services or products and, if applicable, the impact on a
director’s independence. Our audit committee will approve
only those agreements and arrangements that, in light of known
circumstances, are in, or are not inconsistent with, our best
interests, as our audit committee determines in the good faith
exercise of its discretion. The audit committee and disinterested
directors approved the following related party
transactions.
Mr.
Robert D. Buckingham, the chairman of our Board, has a son, Michael
Buckingham, and a daughter, Deborah Buckingham, who are employed by
the Company, and in the aggregate their compensation exceeded
$120,000 during the fiscal year ended May 31, 2017. Michael
Buckingham’s compensation during that period was $104,356.22
and Deborah Buckingham’s compensation during that period was
$65,043.28.
Our
real estate operations conduct business through various projects
and associations, including Fairway Hills I and II, Park West,
Vista Park, Arrowhead View, Fairway Hills Park and Recreational
Association, the Vista Park Homeowners’ Association and the
Park West Homeowners’ Association. Park West consists of 48
apartment units and is owned by a partnership that is 50% owned by
the Company and 50% owned by members of the Buckingham family
(including Robert Buckingham, chairman of our board of directors,
and his siblings and the spouses and estates of his siblings).
Fairway Hills recently completed construction on a 24-unit luxury
apartment complex referred to as Arrowhead View.
Board Committees and Their Functions
Our Board has established a standing audit
committee and a compensation committee. It is our policy
that all directors should attend the Annual Meeting. All directors
attended last year’s annual meeting of
stockholders.
Audit Committee
The
audit committee is responsible, among its other duties and
responsibilities, for overseeing our accounting and financial
reporting processes, the audits of our financial statements, the
qualifications of our independent registered public accounting firm
and the performance of our internal audit function and independent
registered public accounting firm. The audit committee reviews and
assesses the qualitative aspects of our financial reporting, our
processes to manage business and financial risk and our compliance
with significant applicable legal, ethical and regulatory
requirements. The audit committee is directly responsible for the
appointment, compensation, retention and oversight of our
independent registered public accounting firm. The current members
of our audit committee are Dr. Saban, who serves as chair of the
committee, Dr. Crane and Mr. Berzina. Our Board has determined that
Dr. Saban is an “audit committee financial expert,” as
that term is defined under the SEC rules implementing Section 407
of the Sarbanes-Oxley Act of 2002. Each member of our audit
committee is independent under the NASDAQ rules and pursuant to
Rule 10A-3 of the Securities Exchange Act of 1934, as
amended.
The
audit committee held four regular meetings during the fiscal year
ended May 31, 2017.
The audit committee has adopted a written charter.
The audit committee reviews and assesses the adequacy of its
written charter on an annual basis. A current copy of the audit
committee charter may be found on our website at
www.national.edu
under the “Investor
Relations” link and is available in print to any stockholder
who requests it from our Corporate Secretary.
Compensation Committee
Among its various duties and responsibilities, the
compensation committee is responsible for recommending to the Board
the compensation and benefits of our chief executive officer,
establishing the compensation and benefits of our other executive
officers, monitoring compensation arrangements applicable to our
chief executive officer and other executive officers in light of
their performance, effectiveness and other relevant considerations
and administering our equity incentive plans. The
compensation committee also recommends the total compensation paid
to non-management directors. As part
of establishing compensation and benefits of our executive officers
other than our chief executive officer, our chief executive officer
discusses with and recommends to the compensation committee
compensation of executive officers other than himself. The
compensation committee has the authority to retain and terminate a
consultant or other outside advisor on compensation matters and
reviews and discusses with our Board corporate succession plans for
the chief executive officer and other key officers. See the
“Executive and Director
Compensation” section of
this proxy statement for additional information regarding our
processes and procedures for the consideration and determination of
compensation of our named executive officers.
The
current members of our compensation committee are Mr. Halbert, who
serves as chair of the committee, Dr. Crane and Dr. Saban. The
composition of our compensation committee meets the independence
requirements of NASDAQ required for approval of the compensation of
our chief executive officer and other executive
officers.
The
compensation committee held four regular meetings during the fiscal
year ended May 31, 2017.
The compensation committee has adopted a written
charter. The compensation committee has the authority to retain
outside advisors to assist it in the performance of its duties. A
current copy of the compensation committee charter may be found on
our website at www.national.edu
under the “Investor
Relations” link and is available in print to any stockholder
who requests it from our Corporate Secretary.
Board Meetings and Attendance
The
Board held four regular meetings during the fiscal year ended May
31, 2017. Each incumbent director, except director Edward
Buckingham, attended, in person or by telephone, at least 75% of
the meetings of both the Board and Board committees on which he or
she served.
Director Nomination Process
The
Board is responsible for nominating the candidates for election to
the Board and acting with respect to corporate governance policies
and practices, including board size and membership qualifications,
new director orientation, committee structure and membership and
succession planning of our chief executive officer and other key
executive officers. The Board does not have a separate corporate
governance and nominating committee. In accordance with the
requirements of NASDAQ, the director nominees are recommended for
the Board’s selection by or selected by independent directors
constituting a majority of the Board’s independent directors
(the “Independent Directors”) in a vote in which only
independent directors participate.
The
Board regularly assesses the appropriate size of the Board and
whether any vacancies on the Board are expected due to retirement
or otherwise. In the event that vacancies are anticipated, or
otherwise arise, the Board utilizes a variety of methods for
identifying and evaluating director nominees. Candidates may come
to the attention of the Board through current Board members,
professional search firms, stockholders, or other persons. These
candidates are evaluated by the Independent Directors and may be
considered at any point during the year.
All
director nominees selected or recommended by the Independent
Directors and all individuals appointed to fill vacancies created
between our annual meetings of stockholders are required to stand
for election by our stockholders at the next annual meeting. When
there is an opening on the Board, the Independent Directors will
consider candidates who meet the requisite director qualification
standards determined by the Board. When current Board members are
considered for nomination for re-election, their prior
contributions to the Company as directors and meeting attendance
records are taken into account. The Independent Directors will
consider qualified candidates for possible nomination that are
submitted by our stockholders. Stockholders may make such a
submission by sending the following information to the Board, c/o
Corporate Secretary at the address listed below in
“Communications with the Board of
Directors”:
●
the
name and address of the stockholder who intends to make the
nomination;
●
the
name and address of the candidate and a brief biographical sketch
and resume;
●
the
contact information for the candidate and a document evidencing the
candidate’s willingness to serve as a director if elected;
and
●
a
signed statement confirming the submitting stockholder’s
current status as a stockholder and the number of shares currently
held.
The
Independent Directors will evaluate the submission of a proposed
candidate by a stockholder, based on our specific needs at that
time. Based upon a preliminary assessment of the candidate(s),
those who appear best suited to meet our needs may be invited to
participate in a series of interviews, which are used as a further
means of evaluating potential candidates. On the basis of
information learned during this process, the Independent Directors
will determine whether to recommend a candidate for election as a
director at the next annual meeting.
Any
stockholders desiring to present a nomination for consideration by
the Board prior to our 2018 annual meeting must do so no later than
May 4, 2018 in order to provide adequate time to duly consider the
nominee.
Communications with the Board of Directors
Any
stockholder desiring to communicate with our Board, or one or more
of our directors, may send a letter addressed to:
Board
of Directors
National
American University Holdings, Inc.
Attention:
Corporate Secretary
5301
Mt. Rushmore Road
Rapid
City, South Dakota 57701
Our
Corporate Secretary will forward communications received to the
chair of the audit committee or to any individual director or
directors to whom the communication is directed, unless the
communication is unduly hostile, threatening, illegal, does not
reasonably relate to us or our business, or is similarly
inappropriate.
PROPOSAL NUMBER 1—ELECTION OF DIRECTORS
General Information
Our
Bylaws provide that the number of directors shall be fixed from
time to time by the Board, not to exceed nine directors. The Board
has currently fixed the number of directors at nine. The Board has
decided to nominate the nine current directors to next year’s
Board. Our Bylaws also provide that each director shall be elected
each year by the stockholders at the annual meeting of
stockholders, to hold office for a term of one year and until a
successor is elected and qualified.
The
Board has determined that a majority of our current directors
qualify as “independent” directors under NASDAQ rules,
and that each of the nominees Dr. Crane, Dr. Saban, Mr. Halbert,
Mr. Berzina and Mr. Rowan is independent.
You
may vote for all, some or none of the nominees to be elected to the
Board. You may not vote for more individuals than the number
nominated, however. The affirmative vote of a plurality of the
shares of our common stock present in person or by proxy and
entitled to vote at the Annual Meeting is necessary to elect each
director nominee. Each nominee has accepted the nomination and
agreed to serve as a director. We have no reason to expect that any
of the nominees will fail to be a candidate at the Annual Meeting
and, therefore, do not have in mind any substitute or substitutes
for any of the nominees. If any of the nominees should be unable to
serve as a director (which event is not anticipated), proxies will
be voted for a substitute nominee or nominees in accordance with
the best judgment of the person or persons acting under the
proxies. All of the nominees are currently members of the Board and
there are no family relationships among the nominees.
IF YOU RETURN A PROXY CARD THAT IS PROPERLY SIGNED BUT YOU HAVE NOT
MARKED YOUR VOTE, THAT PROXY WILL BE VOTED TO ELECT ALL OF THE
NOMINEES.
Board Voting Recommendation
Management and the Board recommend that
stockholders vote “FOR” the election of each of the nine nominees
listed below to constitute our Board.
Nominees and Directors
Robert D.
Buckingham,
81, became
chairman of our Board as of the closing of our transaction with
Dlorah on November 23, 2009. Mr. Buckingham has served as president
of Dlorah since 1986 and chairman of the board of directors of
Dlorah as well as chairman of the board of governors of National
American University (“NAU”) since 1991. He is a member
of the board of directors of the Rapid City Defense Housing
Corporation, which owns and leases the Dakota Ridge housing. From
1960 to 1981 he worked in various executive and management
positions in transportation and real estate development
organizations. Mr. Buckingham has a B.S. in Business Management
from the University of Colorado. Mr. Buckingham is the father of
Michael Buckingham, who is the president of our real estate
operations.
Mr.
Buckingham’s prior substantial experience as president and
chairman of the board of directors of Dlorah enables him to bring
significant experience to the Board relating to industry
experience, depth of knowledge and familiarity with the Company
with unique insights into the Company’s challenges,
opportunities and operations.
Dr. Jerry
L. Gallentine, 76, is our vice chairperson of our Board. He joined
our Board and was appointed as our president as of the closing of
our transaction with Dlorah on November 23, 2009. Dr. Gallentine
served as our president from 2009 until July 2015, as university
president of NAU from 1993 until July 2015 and as the chief
executive officer of NAU from 1993 until April 2009. Dr. Gallentine
also currently serves on the board of directors of Salem
International University and Schiller International University. Dr.
Gallentine has over 50 years of experience in the education
industry. He served as president of Western New Mexico University
from 1990 to 1993 and was president of Peru State College in
Nebraska from 1982 to 1990. From 1979 to 1982, Dr. Gallentine was
president at Labette Community College in Parsons, Kansas. He was
an assistant professor of biology at Midland Lutheran College in
Fremont, Nebraska, from 1965 through 1968. Dr. Gallentine has
served in many educational and cultural leadership roles, including
past president of the board of directors of the Nebraska
Educational Television Council for Higher Education, past chairman
of the Council of Presidents of the Nebraska State College System,
member of the board of directors of the Nebraska Humanities Council
and founding member of the Nebraska Foundation for the Humanities.
Dr. Gallentine has a B.S. from Fort Hays (Kansas) State University,
and a M.Ed., M.S. and Ph.D. from the University of
Toledo.
Dr.
Gallentine’s experience as university president and chief
executive officer of NAU brings significant expertise, skills and
experience to the Board with respect to leadership, business
operations and industry knowledge.
Dr. Ronald
L. Shape,
50, joined our Board in April
2013. Dr. Shape is also our president and chief executive officer.
Dr. Shape served as chief executive officer since the closing of
our transaction with Dlorah on November 23, 2009, and received the
added role of president during fiscal year 2016. Dr. Shape also
served as our chief financial officer from November 2009 until
October 2011. He has been the chief executive officer of NAU since
April 2009, and was the chief operating officer of NAU from 2006
until 2009. Dr. Shape also served as the chief fiscal officer of
NAU from 2002 until the closing of our transaction with Dlorah. In
2001, Dr. Shape was selected as the assistant to the university
president of NAU and served as regional president for the Minnesota
region with NAU in 2000. Dr. Shape worked in a number of different
positions at NAU from 1991 to 2000, including system controller,
assistant director of financial aid and student account specialist.
Since 2013, Dr. Shape has been serving on the board of directors of
the Education Consolidation Corp., an investment vehicle that
consolidates quality post-secondary education institutions
throughout Canada, and of Sodak Development, Inc. Dr. Shape has a
B.A. from Dakota Wesleyan University and an MBA and Ed.D. from the
University of South Dakota.
Dr.
Shape’s particular qualifications for service on our Board
include his substantial experience and understanding of the
Company’s business, and industry knowledge.
Dr. Therese
K. Crane,
67, joined our Board in January 2010. Since August
2003, she has operated Crane Associates, an educational technology
consulting practice, advising educational technology companies in
business strategy, marketing and sales. She currently serves in
various leadership capacities within the education industry,
including as a trustee for the Western Governors University, and as
a board member of Curriki Foundation, a non-profit providing open
source curriculum to teachers and parents worldwide. In 2016, Dr.
Crane joined the board of directors of Alma Technologies and n2y,
both software companies for K-12 schools. From 2012 to April 2014,
Dr. Crane served on the board of Renaissance Learning, an
educational assessment and learning analytics company. From 2003 to
June, 2011, she served as a consultant for e-Luminate Group, an
education consulting firm. From 2006 to 2012, she was a board
member of Tutor.com. Between 2004 and 2011, Dr. Crane served as
Chairman of the Board of Noble Learning Communities, Inc., a
publicly traded school management company. Formerly, Dr. Crane was
a senior executive at Apple and AOL and the President of
Josten’s Learning. Dr. Crane started her career as an
elementary school classroom teacher. Dr. Crane has a B.S. in
elementary education from the University of Texas at Austin, a
M.Ed. in early childhood education and an Ed.D. in administrative
leadership from the University of North Texas.
Dr.
Crane’s prior experience on our Board and her extensive
consulting work in the educational technology industry brings
considerable expertise, leadership and sound guidance to the Board.
Further, Dr. Crane’s experience as a board member of other
public companies adds expertise to our compensation and audit
committees.
Dr. Thomas
D. Saban,
65, joined
our Board as of the closing of our transaction with Dlorah on
November 23, 2009. He currently serves as vice president of finance
and administration at Prairie State College in Chicago Heights,
Illinois. He served as the vice president of administration and
finance and chief financial officer of Rocky Vista University,
College of Osteopathic Medicine from November 2008 to October 2011.
Dr. Saban has over 25 years of experience in the education
industry. He served as the vice president for finance and
administration/chief financial officer at Texas A&M University
from September 2007 to November 2008, associate vice president for
planning, budgets and research at St. Petersburg College in Florida
from October 2002 to September 2007 and as the vice president for
administration and finance/chief financial officer at Worcester
State College in Massachusetts from September 1996 to October 2002.
He also served as the vice president for finance and
administration/chief financial officer of Chadron State College in
Nebraska from July 1990 to September 1996. Dr. Saban held a number
of other educational and leadership roles from 1982 to 1990,
including as controller, director of finance and system
coordinator/project leader. Dr. Saban has a B.S. from the
University of Wyoming, an MBA from the University of Miami and a
Ph.D. from Barry University.
Dr.
Saban is a licensed CPA and his financial expertise in the
education industry provides valuable specialized knowledge and
financial and analytical skill to the Board.
Richard L.
Halbert,
74, joined
our Board in June 2012. Mr. Halbert has served as a member of
NAU’s Board of Governors for the past 16 years and is a
former chair of the National American University Foundation, which
was originally established as the NCB Foundation in 1967 for the
purpose of making loans and providing scholarships, fellowships,
grants, and other financial assistance to or for the benefit of
students and faculty of NAU. From 2001 to 2007, Mr. Halbert also
served as a member of the board of trustees for the Nebraska State
College Board, which oversees the three Nebraska state colleges.
Mr. Halbert possesses over 26 years of operational and business
advisory experience. In 1991, he co-founded Arck Foods, Inc., a ham
processing company, for which he currently serves as secretary and
corporate counsel. Since 1991, he has also served as president and
secretary of Ol’ Farmers Brand, Inc., a subsidiary of Arck
Foods, Inc. that sells hams to Walmart. Since 1982, Mr. Halbert has
served as a member of the board of directors of Southeast Nebraska
Communications, Inc., for whom he is also corporate counsel. As an
attorney at law whose firm Halbert, Dunn & Halbert, L.L.C.
provides estate planning and business counseling, Mr. Halbert
brings over 43 years of extensive legal experience to the Board. He
is a Fellow in The American College of Trust and Estate
Counsel.
Mr.
Halbert’s past contributions to our Company and extensive
experience in higher education, corporate development, and legal
advisory provides valuable knowledge and experience to our
Board.
Jeffrey B. Berzina,
45, has been serving as the
Vice President – Strategic Planning and Corporate Development
of Black Hills Corporation, a diversified energy company publicly
traded on the New York Stock Exchange, since March 2013. Mr.
Berzina has also held various other positions at Black Hills
Corporation, including Vice President – Corporate Controller
from May 2009 to March 2013, Vice President – Finance from
November 2008 to May 2009, Assistant Corporate Controller from May
2004 to November 2008, and Director of Financial Reporting/Manager
of Financial Reporting from July 2000 to May 2004. Mr. Berzina is a
University of South Dakota graduate and has practiced as a
Certified Public Accountant.
Mr.
Berzina’s considerable experience overseeing strategic
planning, mergers and acquisitions, and the accounting/finance
function of a publicly traded company and his extensive knowledge
of the SEC rules and regulations and accounting rules along with
his strong understanding of the design and management of internal
controls over financial reporting brings an in-depth and wide range
of experience, particularly with respect to financial and
regulatory matters, to our Board.
James A. Rowan, 68,
joined our Board in November 2014. Mr.
Rowan currently serves as a Partner at Parchman Vaughan &
Company, L.L.C., a private investment banking firm specializing in
education. In 1993, Mr. Rowan joined Legg Mason Capital Markets,
which was subsequently acquired by Stifel, Nicolaus & Company,
Incorporated, and played an integral role in developing the
firm’s significant investment banking role in the proprietary
education and training industries. Prior to this, Mr. Rowan was a
venture capitalist for six years and prior to that was a senior
financial executive at ITT Corporation and City Investing Company,
based in New York and London. A graduate of The Lawrenceville
School, he received a bachelor’s degree in economics from
Cornell University and an MBA in Finance from the Johnson Graduate
School of Management at Cornell. Mr. Rowan is a trustee of
Waynesburg University, Secretary of its Board of Trustees, a member
of its Nominating, Executive, and Presidential Evaluation and
Compensation Committees and Chairman of its Finance and Property
Committee. He remains active in alumni affairs at Lawrenceville and
Cornell, where he is on the Dean’s Leadership Committee for
the Johnson School.
Mr.
Rowan’s extensive experience in finance and investment
banking, particularly as it relates to the education space, adds
valuable knowledge to the Board.
Dr. Edward Buckingham,
49, joined our Board in October
2016. Mr. Buckingham is a medical doctor, and the founder, director
and owner of the Bucking Center for Facial Plastic Surgery in
Austin, Texas. Dr. Buckingham started his professional career as an
auditor with Coopers and Lybrand. He founded the Buckingham Center
for Facial Plastic Surgery in July, 2003 after completing his
residency at the University of Texas, and fellowship at New England
Laser and Cosmetic Surgery Center in June, 2003. Dr.
Buckingham is a current board member for the American Board of
Facial Plastic and Reconstructive surgery, and is a frequent
publisher and lecturer on facial plastic surgery. Dr. Buckingham is
the son of Mr. Robert Buckingham, the Company’s chairman, and
the grandson of Mr. Harold Buckingham, the founder of NAU. Dr.
Buckingham grew up in Rapid City, South Dakota following the growth
and developments of his family business. Dr. Buckingham earned his
accounting degree from Southern Methodist University, and his
doctor of medicine degree from University of Texas Medical Branch
at Galveston with highest honors.
Dr.
Buckingham’s life-long involvement with NAU, his audit
experience with Coopers and Lybrand, and management of his own
medical practice brings in-depth knowledge and experience with
respect to finance, management and NAU’s business to the
Board.
EXECUTIVE OFFICERS
The
following sets forth information about our non-director executive
officers as of the date of this proxy statement. For information
regarding Dr. Ronald L. Shape, our chief executive officer, see
“PROPOSAL NUMBER 1—ELECTION OF DIRECTORS—Nominees
and Directors.”
Name
|
Position
|
Dr. Ronald L. Shape
Dr. David K. Heflin
|
President and Chief Executive Officer
Chief Financial Officer
|
Dr. Lynn Priddy
Anthony DeAngelis
Dr. Robert A. Paxton
|
Provost and Chief Academic Officer
Chief Information Officer
President of Strategic Initiatives and External
Relations
|
Dr. David
K. Heflin,
56, is the Chief Financial
Officer and began his career with the Company in June 2015. From
2008 to 2014, Dr. Heflin was the campus president at Colorado
Technical University’s Sioux Falls, South Dakota campus,
where he was responsible for all campus functions. Before starting
his most recent position in 2008, Dr. Heflin served as vice
president of business and operations at Clayton State University in
Morrow, Georgia from 2005. From 2001 to 2005, Dr. Heflin served as
the chief financial officer and chief operating officer at the
University of Sioux Falls, where he was responsible for various
financial, information technology and enrollment management
matters, among others. Prior to his higher education experience,
Dr. Heflin served BellSouth, ICG Telecommunications, Inc., and
USWest in various leadership positions in accounting and financial
management. Dr. Heflin is a licensed certified public accountant
and a certified management accountant. He holds an Ed.D. in
Leadership from the University of St. Thomas in St. Paul,
Minnesota, a Master of Arts degree in Political Science and a
Bachelors of Professional Accountancy from Mississippi State
University.
Dr. Lynn
Priddy,
57, serves as Provost and Chief
Academic Officer of National American University. She joined
National American University in 2013 after serving 14 years with
the Higher Learning Commission of NCA, the largest United States
regional accreditor. Dr. Priddy served as the Vice President for
Accreditation Services during her last seven years with the
Commission. At the Commission, she was responsible for the
accreditation processes, including the decision process, the peer
corps and peer review, education and training, and the Academy for
Assessment of Student Learning, for which she was the founding
director. In her 14-year tenure at the Commission, Dr. Priddy
played a pivotal leadership role in the conceptualization of the
Commission’s new accrediting process, Pathways, the
development of the 1600+ member Peer Review Corps, the
establishment of AQIP, the alternative accrediting process based on
continuous quality improvement principles, and the founding of the
Academy for Persistence and Completion. Dr. Priddy began her higher
education career at Nicolet College. She is a summa cum laude
graduate of the State University of New York at Geneseo with a B.A.
in English, a summa cum laude graduate of the University of
Minnesota-Twin Cities with an M.A. in English; and a summa cum
laude graduate of Capella University with a Ph.D. in Higher
Education, research and evaluation.
Anthony
DeAngelis,
56, joined the Company in 2015
as its Chief Information Officer. Prior to joining the Company, Mr.
DeAngelis served as the Chief Information Officer of Static Control
Components, Inc., the largest manufacturer of aftermarket imaging
systems and components supporting genuine cartridge remanufacturers
from 2013 to 2014. Prior to that, he held the position of
Technology Executive at Nielson Ratings Corporation from 2009 and
2011. Mr. DeAngelis began his career in information technology at
Hewlett Packard where he spent 21 years in various positions,
including Director of Technology. Mr. DeAngelis holds a degree in
Bachelor of Science from the University of
Arizona.
Dr. Robert
A. Paxton,
61, was
appointed to the president of strategic initiatives and external
relations in October 2013. Dr. Paxton served as the president of
online operations from January 2009 to September 2013. From January
1995 to August 2008, Dr. Paxton served as president of Iowa Central
Community College. Dr. Paxton served as vice president of
instruction of Cowley County Community College and Area
Vocational-Technical School, Arkansas City, Kansas, from June 1990
to December 1994 and as dean of student services from July 1988 to
June 1990. Dr. Paxton received his B.A. from Nebraska Christian
College, M.S. from Fort Hayes State University and Ph.D. from
University of Texas at Austin.
EXECUTIVE AND DIRECTOR COMPENSATION
Overview
The compensation committee sets the
compensation principles that guide the design of our compensation
plans and programs for executive management. The compensation
committee is charged with establishing, implementing and
continually monitoring the executive compensation program, and in
doing so endeavors to achieve and maintain a comprehensive package
that is both fair and competitive, in furtherance of our overall
objectives.
Our
compensation program is designed to attract and retain highly
qualified, ethical personnel and to encourage and reward superior
company performance, with the best interests of our students in
mind. Compensation of our officers and directors is designed to be
consistent with the U.S. Department of Education
regulations.
Compensation Philosophy
Our
executive compensation philosophy is to maintain a compensation
program that is both fair and competitive and which rewards
performance of our senior management. To that end, we seek to set
base salaries of our executive officers at levels that are
comparable with that of executive officers at comparable companies,
who have similar job descriptions, responsibilities and
qualifications, such as experience and education level. We also
compare the base salaries of our executive officers to those
individuals at the Company with similar job titles,
responsibilities, performance expectations, years of service at the
Company, experience and education level. We may also adjust an
executive officer’s base salary from year-to-year based on
his or her achievement of subjective performance factors, such as
providing effective day-to-day leadership and management of the
university’s operations, developing strategic business plans,
motivating and coordinating a high performance management team,
supervising quality control systems of the university’s
academic programs, and overseeing the ethical conduct of university
personnel. Our compensation committee also considers whether such
executive consistently met or exceeded his or her key operational
targets, such as profit margins and net income. In considering
these factors, our compensation committee does not weigh any one
factor over another in setting base salary, but rather takes the
various factors and performance reviews into consideration as a
whole. Through this process, we seek to set base salaries for our
executive officers that are both competitive and fair.
We
also incorporate certain components into our executive compensation
to incentivize our executives to achieve certain financial
performance targets for the Company on a quarterly and annual
basis, such as profit margins and net income. The financial
performance targets contained in such formulas are configured to
reward achievement of financial goals that reflect successful
growth in revenue, increase in profitability, and efficient
management of our costs. In setting these goals, the compensation
committee may offer greater reward for achieving one metric over
another depending on the level of importance it attaches to one
factor over another. For example, the compensation committee may
provide additional reward for achieving profitability and growth
over cost goals, if it determines that such factors are more
central to our strategic plan. Review of such metrics and weighing
of each factors are conducted on an annual basis. Such a
compensation system, we believe, not only encourages hard work, but
also simplifies and makes more transparent our pay
structure.
The
compensation committee believes that our compensation programs are
designed with an appropriate balance of risk and reward in relation
to our overall objectives and do not create risks that are
reasonably likely to have a material adverse effect on the
Company’s business. In this regard, the compensation
committee believes that our mix of short- and long-term
compensation elements encourages our management to produce
consistent, short-term financial results for the Company, but also
encourages our management to increase long-term stockholder value.
In particular, our quarterly and annual achievement awards reward
our executive officers for achieving our short-term financial
goals. Our long-term compensation, on the other hand, has an
equity-based component that is intended to ensure that our
executive officers’ focus on increasing long-term stockholder
value. Through vesting and other performance measure provisions,
our long-term compensation program is also designed to emphasize
the performance measures that our executive officers need to
achieve in order to deliver stockholder value.
Consistent with our
compensation philosophy, the executive compensation program has
been specifically designed to achieve the following
objectives:
●
Meet the demands of the market. Provide
an attractive combination of salary and quarterly, annual and
long-term compensation at competitive levels among our peers who
provide similar educational services in the markets we serve, to
enable the recruitment and retention of highly qualified
executives. We believe that the supply of qualified executive
talent is limited and have designed our compensation programs to
help us attract and retain qualified candidates by providing
compensation that is competitive within the for-profit education
industry and the broader market for executive talent. Our executive
compensation policies are designed to assist us in attracting and
retaining qualified executives by providing competitive levels of
compensation that are consistent with the executives’
alternatives.
●
Aligning with Stockholders. Align the
interests of executives with those of our stockholders through
grants of equity-based compensation that also provide opportunities
for ongoing executive ownership. Our compensation program uses
equity-based awards, the value of which is contingent on our
longer-term performance, in order to provide our executive officers
with a direct incentive to seek increased stockholder returns. Our
stockholders receive value when our stock price increases and by
using equity-based awards, our executive officers also receive
increased value when our stock price increases and decreased value
when it decreases. We believe that equity-based awards exemplify
our philosophy of having a straightforward structure by reminding
executive officers that one measure of long-term corporate success
is increased stockholder value over time. Because our equity awards
are granted with time-based vesting, we believe these awards also
aid in the retention of our executive officers.
●
Driving Performance. Structure
executive compensation around the attainment of both company-wide
and individual targets that further the Company’s long-range
goals with the best interests of our students in mind and
consistent with the U.S. Department of Education regulations. Link
executive pay to attainment of both company-wide and individual
targets to further and reward achievement of Company’s
long-range goals.
Role of Management in Determining Compensation
Dr. Ronald
L. Shape, our president and chief executive officer, on an annual
basis makes recommendations to the compensation committee of our
Board regarding the base salaries of our executive officers, other
than for himself. The compensation committee also consults with
Dr. Shape in identifying key operational targets of the
Company and determining appropriate individual performance metrics
for the executive officers for the following fiscal
year.
Compensation Elements
The
compensation program for our executive officers is comprised
primarily of three elements: base salary, quarterly and annual
incentives, and long-term equity awards. The amount of each
compensation element that is paid in proportion to the total
compensation for each named executive officer depends on overall
market conditions and the financial performance achieved by the
Company.
Base Salary. Base
salary is an integral part of compensation for our executive
officers. Unless determined pursuant to an employment agreement,
the compensation committee generally recommends, and the Board
approves, base salary levels for our named executive officers after
completion of our annual employee performance review program and
during the time when any salary changes are to take effect. In
general, the compensation committee considers the following
factors: (i) the individual’s performance and contribution to
the long-range goals of the Company’s recent operating
results, and (ii) review of salaries in the market survey data and
for similar positions for comparable companies.
Quarterly and Annual
Incentives. We have placed an emphasis on performance-based
quarterly and annual achievement awards that are designed to reward
our executive management team based on the achievement of specific
performance measures and goals. We believe quarterly and annual
performance-based pay furthers our compensation philosophy and
objectives by focusing our executive officers on corporate goals,
encouraging continuous quality improvement and providing
straightforward awards. The target for quarterly and annual
achievement awards pay for our executive officers is expressed as a
percentage of base salary.
Long-Term Equity
Awards. We believe that executive officers should have a
significant potential to benefit from increases in our equity value
in order to align the interests of the executive officers and our
stockholders. The Company provides long-term equity awards under
the National American University Holdings, Inc. 2009 Stock Option
and Compensation Plan, or the “2009 Plan,” and the 2013
Restricted Stock Unit Plan, or the “2013 Plan.” The
2009 Plan gives the compensation committee the latitude of awarding
stock options, non-qualified stock options, restricted stock and
other types of long-term equity awards. The 2013 Plan was approved
by the stockholders of the Company at the 2013 annual meeting and
it allows awarding of restricted stock units and cash awards. Our
equity awards may be split among stock options, restricted stock
and restricted stock units so that the executive officers are
incentivized to preserve as well as grow stockholder value. Our
stock options, restricted stock and restricted stock unit awards
generally use one- to three-year vesting with ten-year terms.
Summary Compensation Table
The
following table and accompanying narrative disclosure explains
compensation for the last two fiscal years for the individual who
served as our chief executive officer during fiscal 2017, and for
each of the two other most highly-compensated executive officers,
other than our chief executive officer (collectively, the
“named executive officers”).
Name and
Title
|
|
Fiscal
Year
|
|
Salary
($)
|
|
Stock
Awards
($)
|
|
Option
Awards
($)(1)
|
|
Non-Equity
Incentive
Plan
Compensation
($)(7)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Ronald L. Shape
President and Chief
Executive Officer
|
|
2017
|
|
315,963
|
|
151,655(2)
|
|
1,545
|
|
0
|
|
0
|
|
469,163
|
|
|
2016
|
|
343,941
|
|
267,951(3)
|
|
45,375
|
|
0
|
|
0
|
|
657,267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Lynn Priddy
Provost
and Chief Academic Officer
|
|
2017
|
|
180,596
|
|
56,175(4)
|
|
618
|
|
18,324
|
|
0
|
|
255,713
|
|
|
2016
|
|
181,500
|
|
84,920(5)
|
|
8,410
|
|
9,050
|
|
0
|
|
283,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Robert Paxton
President of
Strategic Initiatives
|
|
2017
|
|
183,825
|
|
56,175
(4)
|
|
618
|
|
19,000
|
|
0
|
|
259,618
|
|
|
2016
|
|
190,000
|
|
59,670(6)
|
|
8,007
|
|
28,500
|
|
0
|
|
286,177
|
|
_______________________________________
(1) Amounts represent the aggregate grant date fair
value of stock options as computed in accordance with FASB ASC
Topic 718 utilizing the assumptions discussed in Note 11 to our
Notes to the Annual Consolidated Financial Statements for the
fiscal year ended May 31, 2017.
(2)
Amount
represents $35,692 in stock portion of annual base salary, and the
aggregate grant date fair value of 61,250 restricted stock units
which did not vest and merit award of 3,750 shares of common
stock.
(3)
Includes $102,852
in stock portion of annual base salary.
(4)
Amount represents
the aggregate grant date fair value of 30,000 restricted stock
units which did not vest and merit award of 1,500 shares of common
stock.
(5) Amount represents
the aggregate grant date fair value of 22,000 restricted stock
units which did not vest and merit award of 10,000 shares of common
stock.
(6)
Amount represents
the aggregate grant date fair value of 19,500 restricted stock
units which did not vest.
(7)
Represents
quarterly merit award payments. See discussion under “Annual
and Quarterly Incentives” below.
Discussion of Executive Compensation Decisions
Base Salaries
Our
named executive officers’ compensation was determined, in
part, by arrangements in effect between Dlorah and such named
executive officer. The base salary of Dr. Shape was determined
pursuant to his employment agreement that is described below under
the heading “Employment Agreements.” In setting the
annual base salary of our senior executive officers, the
compensation committee of our Board considered base salaries of
other officers of similar ranks at the Company and at companies
that provide similar educational services in the markets we serve
and compared responsibilities of the position, performance
expectations, years of service, experience and education level. The
committee also considered individual’s performance and
contribution to the long-range goals of the Company’s recent
operating results. Our compensation committee does not have a
predetermined formula or metric in comparing these factors, but
generally sets a base salary it believes to be competitive but fair
for each of our executive officers, based on the recommendations
made by our chief executive officer. The amount of base salaries
paid to each named executive officer for the fiscal years ended May
31, 2017 and 2016, are reported in the column captioned
“Salary” of the “Summary Compensation
Table” above.
Equity Awards
The
compensation committee believes that it is in the best interest of
our stockholders to have a substantial component of total
compensation “at-risk” and dependent upon our financial
performance.
Fiscal Year 2017
During
fiscal year 2017, Dr. Shape, Dr. Priddy and Dr. Paxton received
restricted stock units of 61,250, 30,000 and 30,000 respectively,
under the 2013 Restricted Stock Unit Plan with the following
performance-based vesting schedule.
Audited
Operating Income/Loss Metric as of May 31, 2017
|
Percentage of Restricted
Stock
Units that will
vest
|
Income equal to or
greater than $0
|
100%
|
Loss equal to or
less than ($2,750,000) and greater than
$0
|
67%
|
Loss equal to or
less than ($3,250,000) and greater than
($2,750,000)
|
50%
|
Loss greater than
($3,250,000)
|
0%
|
None of
the restricted stock units vested as audited operating loss as of
May 31, 2017 was greater than ($3,250,000).
Each of
Dr. Ronald Shape, Dr. Lynn Priddy, and Dr. Robert Paxton was
granted 3,750, 1,500 and 1,500 shares of common stock,
respectively, as merit awards.
Each of
Dr. Ronald Shape, Dr. Lynn Priddy, and Dr. Robert Paxton was also
granted stock options to purchase 3,750, 1,500 and 1,500 shares,
respectively. Half of the options were immediately exercisable upon
the grant date of October 20, 2016, and the other half exercisable
on June 1, 2017.
In
addition to the stock option grant, in accordance with the terms of
the employment agreement between National American University and
Dr. Ronald Shape, for fiscal year 2017 Dr. Shape received
$35,692.20 in common stock as part of his annual base
pay.
Fiscal Year 2016
In
fiscal year 2016, Dr. Priddy and Dr. Paxton received restricted
stock units of 22,000 and 19,500 respectively, under the 2013
Restricted Stock Unit Plan with the following performance-based
vesting schedule.
Audited Operating Income Metric as of May 31,
2016
|
Percentage of Restricted
Stock
Units that will vest
|
Equal
to or greater than $6,035,750
|
100%
|
Equal
to or greater than $5,733,000 and less than $6,035,750
|
50%
|
Less
than $5,733,000
|
0%
|
None of
the restricted stock units vested as audited operating income as of
May 31, 2016 was less than $5,733,000. Dr. Priddy was also awarded
10,000 shares of common stock as a merit award.
In
fiscal year 2016, each of Dr. Ronald Shape, Dr. Lynn Priddy, and
Dr. Robert Paxton was granted stock options to purchase 53,954,
10,000 and 9,521 shares, respectively. Half of the options were
immediately exercisable upon the grant date of October 20, 2015,
and the other half exercisable on June 1, 2016.
In
addition to the stock option grant, in accordance with the terms of
the employment agreement between National American University and
Dr. Ronald Shape, for fiscal year 2016 Dr. Shape received $102,852
in stock as part of his annual base pay.
Annual and Quarterly Incentives
Dr. Ronald L. Shape.
For fiscal years ended May 31, 2017 and 2016, pursuant to the terms
of his employment agreement, Dr. Shape was eligible to receive
annual incentive pay. Annual incentive pay was determined in
accordance with the following guidelines and other terms and
exclusions as set forth in his employment agreement and was paid
75% in cash and 25% in Company stock under the 2009 Plan. Operating
ratio was calculated by dividing total operating expenses by total
revenue, except that the operating expenses and gross profit do not
include: provisions for state and federal income taxes; interest
income; interest expense; contribution to the Company’s
401(k) retirement program; gains and losses from securities;
extraordinary items shown on the financial statement and gains or
losses from the sale of major corporate properties outside the
normal course of business; business expansion and development
expenses and income from the inception through a period of two
years from the date of enrollment of the first student at any new
campus, location or program; accrued annual bonus calculations for
the chief executive officer; and compensation expense of and for
the Board.
Performance Guidelines
|
|
Payout
|
Company
achieves an operating ratio (total operating expenses over total
revenue) of less than 90%
|
|
No
annual incentive pay
|
Company
achieves an operating ratio (total operating expenses over total
revenue) of equal to or less than 80%
|
|
Annual
incentive pay of 1% of the Company’s total revenue (less Dr.
Shape’s base salary)
|
Company
achieves an operating ratio (total operating expenses over total
revenue) between 80% and 90%
|
|
Prorated
annual incentive pay
|
In
accordance with the above annual incentive pay guidelines, no
additional annual incentive pay was awarded to Dr. Shape in fiscal
years 2017 and 2016.
Dr. Lynn Priddy and Dr. Robert Paxton
Fiscal Year 2017
For
fiscal year 2017, Dr. Priddy and Dr. Paxton were eligible for
quarterly and annual achievement awards based on achieving
predetermined performance objectives and targets for the Company.
Dr. Priddy and Dr. Paxton were eligible for quarterly achievement
awards based on meeting the Company’s budgeted quarterly
pre-tax profit margins and certain quarterly organizational
objectives related to institutional effectiveness goals. The amount
of the quarterly achievement awards were calculated quarterly by
taking the appropriate percentage multiplied by their current
annual base salaries. They would receive a percentage of their
annual base salaries each quarter based on achieving the objectives
listed below. The maximum amount of quarterly achievement award
that each of Dr. Priddy and Dr. Paxton was entitled to receive in
fiscal 2017 was 80% of her or his annual base salary. We are not disclosing the quarterly profit margin
targets because we believe such disclosure would cause us
competitive harm in that it would reveal confidential future
business plans and objectives. We set our quarterly profit margin
targets based on our confidential strategic business plan and
budget. Because our revenue and expenditure projections are based
on our internal forecasts and confidential information about our
business and developed primarily as a tool to facilitate strategic
planning, disclosure of the profit targets would cause us
significant competitive harm. Based on our prior years’
quarterly profit figures and our strategic business plans and
objectives, we believe these profit targets were set sufficiently
high to provide incentive to achieve a high level of performance.
We believed it was difficult, although not unattainable, for the
targets to be reached and, therefore, no more likely than unlikely
that the targets will be reached.
Quarterly
Objectives
|
|
Percentage of
Annual Base
Salary
|
|
Description
|
1
|
|
10% per quarter
|
|
For achieving the approved budgeted NAUH pre-tax profit margin for
the quarter.
|
|
|
5% per quarter
|
|
For achieving less than 100% but greater than 90% of the approved
budgeted NAUH pre-tax profit margin.
|
2
|
|
10% per quarter
|
|
For achieving a performance index of 90% or better for overall
performance for the quarter.
|
|
|
5% per quarter
|
|
For achieving a performance index of greater than 80% and less than
90% for overall performance for the quarter.
|
As a
result of performance objectives and targets achieved, Dr. Priddy
and Dr. Paxton earned $18,324 and $19,000 in quarterly achievements
awards, respectively.
For
fiscal year 2017, annual achievement award component was based on
the Company’s actual earnings before interest and taxes, or
EBIT, for fiscal year 2017. To the extent that the actual EBITs for
the fiscal year exceeded the budgeted EBITs for the fiscal year, as
determined by the Board, each of Dr. Priddy and Dr. Paxton was
eligible to receive 5% of the excess up to a maximum of 75% of her
or his annual base salary. The Company’s actual EBIT for the
fiscal year 2017 did not exceed the budgeted EBIT, so no additional
annual achievement award was paid for the fiscal year
2017.
Fiscal Year 2016
For
fiscal year 2016, Dr. Priddy and Dr. Paxton were eligible for
quarterly and annual achievement awards based on achieving
predetermined performance objectives and targets for the Company.
Dr. Priddy and Dr. Paxton were eligible for quarterly achievement
awards based on meeting the Company’s budgeted quarterly
pre-tax profit margins and certain quarterly organizational
objectives, as set forth below. The amount of the quarterly
achievement awards were calculated quarterly by taking the
appropriate percentage multiplied by their current annual base
salaries. They would receive a percentage of their annual base
salaries each quarter based on achieving the objectives listed
below. The maximum amount of quarterly achievement award that each
of Dr. Priddy and Dr. Paxton was entitled to receive in fiscal 2016
was 80% of her or his annual base salary. We are not disclosing the quarterly profit margin
targets because we believe such disclosure would cause us
competitive harm in that it would reveal confidential future
business plans and objectives. We set our quarterly profit margin
targets based on our confidential strategic business plan and
budget. Because our revenue and expenditure projections are based
on our internal forecasts and confidential information about our
business and developed primarily as a tool to facilitate strategic
planning, disclosure of the profit targets would cause us
significant competitive harm. Based on our prior years’
quarterly profit figures and our strategic business plans and
objectives, we believe these profit targets were set sufficiently
high to provide incentive to achieve a high level of performance.
We believed it was difficult, although not unattainable, for the
targets to be reached and, therefore, no more likely than unlikely
that the targets will be reached.
Quarterly
Objectives
|
|
Percentage of
Annual Base
Salary
|
|
Description
|
1
|
|
10% per quarter
|
|
For achieving the approved budgeted NAUH pre-tax profit margin for
the quarter.
|
|
|
5% per quarter
|
|
For achieving less than 100% but greater than 90% of the approved
budgeted NAUH pre-tax profit margin.
|
2
|
|
10% per quarter
|
|
For achieving a composite survey result of 88 points or better for
overall performance for the quarter.
|
|
|
5% per quarter
|
|
For achieving a composite survey result of greater than 75 points
and less than 88 points for overall performance for the
quarter.
|
As a
result of performance objectives and targets achieved, Dr. Priddy
and Dr. Paxton earned $9,050 and $28,500 in quarterly achievements
awards, respectively.
For
fiscal year 2016, annual achievement award component was based on
the Company’s EBIT for fiscal year 2016. To the extent that
the actual EBITs for the fiscal year exceeded the budgeted EBITs
for the fiscal year, as determined by the Board, each of Dr. Priddy
and Dr. Paxton was eligible to receive 3% of the excess up to a
maximum of 75% of her or his annual base salary. The
Company’s actual EBIT for the fiscal year 2016 did not exceed
the budgeted EBIT, so no additional annual achievement award was
paid for the fiscal year 2016.
Outstanding Equity Awards at Fiscal
Year-End
As of
fiscal year ended May 31, 2017, the restricted stock that were
granted to our named executive officers in fiscal year 2017 did not
vest and were forfeited, as further described above under
“Equity Awards.”
|
|
Option
Awards
|
Name
|
|
|
Number
of
securities
underlying
unexercised
options
(#)
exercisable
|
Option
exercise
price
($)
|
Option
expiration
date
|
|
|
|
|
|
|
Dr.
Ronald L. Shape
|
|
|
3,750(1)
53,954(2)
3,750(3)
|
$3.11
$3.06
$1.96
|
10/20/2024
10/20/2025
10/20/2026
|
|
|
|
|
|
|
Dr.
Robert Paxton
|
|
|
1,875(1)
|
$3.11
|
10/20/2024
|
|
|
|
9,521(2)
|
$3.06
|
10/20/2025
|
|
|
|
1,500(3)
|
$1.96
|
10/20/2026
|
|
|
|
|
|
|
Dr.
Lynn Priddy
|
|
|
15,000(4)
|
$3.67
|
1/22/2024
|
|
|
|
10,000(2)
|
$3.06
|
10/20/2025
|
|
|
|
1,500(3)
|
$1.96
|
10/20/2026
|
__________________________________________________
(1)
These stock options were immediately
exercisable upon the grant date of October 20,
2014.
(2)
These stock options
were granted on October 20, 2015, and vested in full as of June 1,
2016.
(3)
These stock options
were granted on October 20, 2016, and vested in full as of June 1,
2017.
(4)
These stock options
were granted on January 21, 2015, and vested in full as of June 1,
2015.
Employment Agreements
National American
University, a division of Dlorah, our wholly-owned subsidiary,
currently has an employment agreement with Dr. Shape. There are no
employment agreements or arrangements, whether written or
unwritten, for Dr. Paxton or Dr. Priddy, other than the
compensation plan which is described above under Quarterly and
Annual Achievement Awards.
Dr. Ronald L. Shape
On
August 30, 2012, NAU entered into an executive employment
agreement, dated effective as of June 1, 2012, with Dr. Shape (the
“Employment Agreement”). The Employment Agreement
replaces and supersedes Dr. Shape’s prior employment
agreement with the Company dated effective as of June 1, 2011 (the
“Prior Agreement”). The term of Dr. Shape’s
Employment Agreement continues until terminated by either party,
upon mutual written agreement of both parties or upon resignation
by the CEO upon twenty-four (24) calendar months’ written
notice. The Employment Agreement provides for an initial annual
base compensation of $427,500 to be paid as follows: $327,500 in
cash or current funds and $100,000 in stock or other equity under
the Company’s 2009 Stock Option and Compensation Plan (the
“2009 Plan”). Commencing with NAU’s fiscal year
beginning June 1, 2013 and for each of NAU’s fiscal years
thereafter during the term of the agreement, Dr. Shape’s base
annualized salary will be increased or decreased by the appropriate
percentage increase or decrease in the Consumer Price Index –
US City Average – All Urban Consumers. The Employment
Agreement provides that if Dr. Shape is continuously employed
through the last day of a fiscal year, he is entitled to receive
“Annual Incentive Pay” for such fiscal year, determined
and paid according to the guidelines set forth in the agreement and
to be paid 75% in cash and 25% in stock or other equity under the
Company’s 2009 Plan. The Employment Agreement also provides
that Dr. Shape is entitled to participate in NAU’s benefit
programs for its employees, to take up to five weeks paid time off
and to be reimbursed for his business expenses.
In the
event that Dr. Shape’s employment is terminated for
“cause,” Dr. Shape will be entitled to (i) his base
salary then in effect, prorated to the date of termination, (ii)
all fringe benefits through the date of termination, and (iii) the
remaining installments due, if any, for any Annual Incentive Pay
earned for a NAU fiscal year prior to the final year that includes
Dr. Shape’s date of termination. In the event that Dr.
Shape’s employment is terminated without “cause,”
Dr. Shape will be entitled to receive, as liquidated damages, (i)
his then current base salary, payable monthly, for two years after
termination or until he is again employed by another employer,
whichever occurs first, and (ii) COBRA and continuation premiums
for monthly health and dental insurance to continue the coverage in
effect at termination for Dr. Shape and his dependents for a period
of twelve months following termination. Dr. Shape will be entitled
to receive the liquidated damages only if he signs and does not
rescind a severance agreement at the time of
termination.
The
Employment Agreement includes a clawback provision whereby Dr.
Shape may be required, upon certain triggering events, to repay all
or a portion of the payments and benefits provided under the
Employment Agreement, pursuant to any clawback policy adopted by or
applicable to the Company pursuant to the Dodd-Frank Wall Street
Reform and Consumer Protection Act, any Securities and Exchange
Commission rule, any applicable listing standard promulgated by any
national securities exchange or national securities association, or
any other legal requirement. The Employment Agreement includes an
agreement by Dr. Shape that he will not disclose any confidential
information of NAU at any time during or after employment. In
addition, the covenant not to compete set forth in the Employment
Agreement will terminate 24 months after termination of Dr.
Shape’s employment with NAU.
Director Compensation and Benefits
Our
compensation committee periodically reviews the total compensation
paid to non-management directors. The purpose of the review is to
ensure that the level of compensation is appropriate to attract and
retain a diverse group of directors with the breadth of experience
necessary to perform the Board’s duties, and to fairly
compensate directors for their service. The compensation committee
considers the time and effort required for service on the Board, a
Board committee and as a committee chair, and to the extent
available reviews Board compensation survey information for
comparably sized public companies.
For
fiscal year ended May 31, 2017, non-employee directors of the
Company received a retainer, pro-rated at $30,000 per annum. A
director also received $4,000 for each committee he or she served
on, while the Audit committee chair received $15,000 and the
Compensation committee chair received $10,000. In addition, each
non-employee director annually receives restricted stock in an
amount equal to $20,000 based on the closing price of our
common stock on the date of grant. The Company’s directors
and their dependents receive health insurance coverage under our
health care plan or equivalent payment for premium costs if the
director declines health insurance coverage. Mr. Buckingham
receives an annual retainer of $100,000 for serving as the chairman
of our Board. Dr. Gallentine receives an annual retainer of
$130,000 for serving as vice-chairman of our Board.
The
following table summarizes the compensation earned by our
non-management directors during fiscal 2017:
Director
Compensation
Name
|
Fees Earned
or
Paid in
Cash
($)
|
|
All Other
Compensation
($)
|
|
|
|
|
|
|
Robert
Buckingham
|
41,667
|
--
|
17,678(1)
|
59,345
|
Dr. Jerry L.
Gallentine
|
130,000
|
--
|
16,058(2)
|
146,058
|
Jeffrey B.
Berzina
|
38,000
|
15,870
|
7,247(3)
|
61,117
|
Dr. Therese K.
Crane
|
38,012
|
15,870
|
9,483(3)
|
63,365
|
Richard L.
Halbert
|
40,000
|
15,870
|
7,549(3)
|
63,419
|
Dr. Thomas D.
Saban
|
49,000
|
15,870
|
7,549(3)
|
72,419
|
James
Rowan
|
45,000
|
15,870
|
7,247(3)
|
68,117
|
Dr. Edward
Buckingham
|
17,500
|
--
|
--
|
17,500
|
_____________________________________________________________________________________________
(1)
Consists of $11,707 in health insurance benefits and $5,971 in use
of company plane.
(2)
Consists of $6,803
in health insurance benefits, $5,432 in use of company plane for
commuting between his home in Kansas to the Company and $3,823 in
country club dues.
(3)
Represents health insurance benefits.
Beneficial Ownership of Principal Stockholders, Directors and
Management
The
table presented below shows information regarding the beneficial
ownership of our common stock as of August 8, 2017
by:
●
each person or
entity known by us to own beneficially more than 5% of our
outstanding common stock;
●
each of our named
executive officers; and
●
all of our
directors and executive officers as a group.
As of
August 8, 2017, 24,231,071 shares of our common stock were issued
and outstanding.
The
information in the following table has been presented in accordance
with the rules of the SEC. Under the SEC rules, beneficial
ownership of a class of capital stock includes any shares of such
class as to which a person, directly or indirectly, has or shares
voting power or investment power and also any shares as to which a
person has the right to acquire such voting or investment power
within 60 days through the exercise of any stock option, warrant or
other right. If two or more persons share voting power or
investment power with respect to specific securities, each such
person is deemed to be the beneficial owner of such securities.
Except as we otherwise indicate below and under applicable
community property laws, we believe that the beneficial owners of
the common stock listed below, based on information they have
furnished to us, have sole voting and investment power with respect
to the shares shown. Unless otherwise specified, the address of
each of our directors, executive officers and each person or entity
known by us to beneficially own more than 5% of our outstanding
common stock is c/o National American University Holdings, Inc.,
5301 Mt. Rushmore Road, Rapid City, South Dakota
57701.
Name and Address
of Beneficial Owner
|
Amount and Nature of
Beneficial Ownership
|
|
H. & E.
Buckingham Limited Partnership
|
10,156,905
|
41.7%
|
|
|
|
Robert D.
Buckingham Living Trust
|
3,457,864
|
14.2%
|
|
|
|
Camden Learning,
LLC
|
2,207,642(1)
|
9.1%
|
|
|
|
T. Rowe Price
Associates, Inc.
|
2,456,503(2)
|
10.1%
|
|
|
|
Michael Joseph
Hilyard
|
1,094,376(3)
|
4.5%
|
|
|
|
Robert D.
Buckingham Chairman of the Board of Directors
|
13,614,769(4)
|
56.0%
|
|
|
|
Dr. Ronald L. Shape
President, Chief Executive Officer and Director
|
477,823(5)
|
2.0%
|
|
|
|
Dr. Lynn
Priddy Provost and Chief
Academic Officer
|
38,000(6)
|
*
|
|
|
|
Dr. Robert
Paxton President of
Strategic Initiatives and External Relations
|
41,491(7)
|
*
|
|
|
|
Dr. Edward D.
Buckingham Director
|
45,175(8)
|
*
|
|
|
|
Dr. Jerry L.
Gallentine Director
|
83,000
|
*
|
|
|
|
Dr. Therese K.
Crane Director
|
64,892
|
*
|
|
|
|
Dr. Thomas D. Saban
Director
|
33,784
|
*
|
|
|
|
Richard L. Halbert
Director
|
45,112
|
*
|
|
|
|
Jeffrey B. Berzina
Director
|
33,210
|
*
|
|
|
|
James A.
Rowan Director
|
23,917
|
*
|
|
|
|
All directors and
executive officers as a group (of 11 individuals)
|
14,501,173
|
59.6%
|
*
|
Less
than 1%.
|
|
|
(1)
|
Based
on information contained in a report on Schedule 13D/A filed with
the SEC on March 6, 2014, and Form 4 filed with the SEC on October
31, 2013. The sole owners and members of Camden Learning, LLC are
Camden Partners Strategic Fund III, L.P. and Camden Partners
Strategic Fund III-A, L.P. The general partner of each limited
partnership is Camden Partners Strategic III, LLC and the managing
member of such entity is Camden Partners Strategic Manager, LLC.
David L. Warnock, Donald W. Hughes, Christopher Kersey, Jason
Tagler, Shane Kim and J. Todd Sherman are the managing members of
Camden Partners Strategic Manager, LLC, which has sole power to
direct the vote and disposition of our common stock held by Camden
Learning, LLC. Each of Mr. Warnock, Mr. Hughes, Mr. Kersey, Mr.
Tagler, Mr. Kim and Mr. Sherman disclaims beneficial ownership of
our securities owned by Camden Learning, LLC, except to the extent
of his pecuniary interest therein. The principal business address
of Camden Learning, LLC is 500 East Pratt Street, Suite 1200,
Baltimore, Maryland 21202.
|
|
|
(2)
|
Based
on information contained in a report on Schedule 13G/A filed with
the Securities and Exchange Commission on February 7, 2017 by T.
Rowe Price Small-Cap Value Fund, Inc. and T. Rowe Price Associates,
Inc., each of which has its principal business office at 100 East
Pratt Street, Baltimore, Maryland 21202. February 7, 2017, T. Rowe
Price Associates, Inc. reported that it had sole voting power over
264,503 shares and sole dispositive power over 2,456,503 shares,
and T. Rowe Price Small-Cap Value Fund, Inc. reported that it had
sole voting power over 2,192,000 shares and sole dispositive power
over 0 shares.
|
|
|
(3)
|
Based
on information contained in a report on Schedule 13G filed with the
Securities and Exchange Commission on November 3, 2016 by Michael
Joseph Hillyard and Cara Marie Hillyard, each of whom has his and
her principal business office at 5378 Chandler Bend Drive,
Jacksonville, Florida 32224. As of November, 3, 2016, Michael
Hillyard reported that he had sole voting and dispositive power
over 110,542 shares and shared voting and dispositive power over
1,094,376 shares, and Cara Hillyard reported that she had sole
voting and dispositive power over 72,645 shares and shared voting
and dispositive power over 1,094,376 shares.
|
|
|
(4)
|
Consists
of common stock and common stock warrants owned by the H. & E.
Buckingham Limited Partnership and the common stock owned by the
Robert D. Buckingham Living Trust. Mr. Buckingham is the general
partner of the H. & E. Buckingham Limited Partnership and in
this capacity has sole power to direct the vote and disposition of
our securities held by the H. & E. Buckingham Limited
Partnership. Mr. Buckingham disclaims beneficial ownership of our
securities owned by the H. & E. Buckingham Limited Partnership
except to the extent of any pecuniary interest therein. As the
trustee for the Robert D. Buckingham Living Trust, Mr. Buckingham
is deemed to have sole voting and dispositive power of our
securities held by the trust and is deemed to be the beneficial
owner of all our securities owned by the Robert D. Buckingham
Living Trust.
|
|
|
(5)
|
Includes
options to purchase 61,454 shares of common stock of the
Company.
|
|
|
(6)
|
Includes
options to purchase 26,500 shares of common stock of the
Company.
|
|
|
(7)
|
Includes
options to purchase 12,896 shares of common stock of the
Company.
|
|
|
(8)
|
Consists
of common stock owned by Buckingham Interests, L.P. Dr. Buckingham
is the general partner of Buckingham Interests L.P. and in this
capacity has sole power to direct the vote and disposition of our
securities held by Buckingham Interests L.P.
|
Section 16(a) Beneficial Ownership Reporting Compliance
Based on our review of reports filed with the SEC
by our directors, executive officers and beneficial owners of more
than 10 percent of our common stock regarding their ownership and
transactions in our common stock, we believe that each executive
officer, director and 10 percent beneficial owner complied with all
filing requirements in a timely manner under
Section 16(a) of the Securities Exchange Act of 1934, as
amended, during fiscal 2017, except for Holly Mudlin’s
filing of Form 3 on February 7, 2017 for becoming a Campus Director
Rapid City on November 1, 2016, and Michael Johnson’s filing
of Form 3 on February 7, 2017 for becoming System Director of
Military Service on May 10, 2016.
Audit Committee Report
Our
audit committee is responsible for retaining the Company’s
independent registered public accounting firm and approving the
services it will perform. Pursuant to the charter adopted by the
Board on November 30, 2009, the audit committee acts on behalf of
the Board to oversee our financial reporting processes and the
adequacy of our internal controls. The audit committee reviews
financial and operating reports and disclosures, including our
reports filed on Forms 10-K and 10-Q. The audit committee also
reviews the performance of the Company’s internal auditor and
independent registered public accounting firm.
Management
is responsible for the reporting processes and the preparation and
presentation of financial statements and the implementation and
maintenance of internal controls. Our independent registered public
accounting firm is responsible for expressing an opinion on the
conformity of the Company’s audited financial statements to
accounting principles generally accepted in the United States. The
audit committee’s responsibility is to monitor and oversee
these processes.
In
connection with our consolidated financial statements for the
fiscal year ended May 31, 2017, the audit committee
has:
●
reviewed and discussed the audited financial
statements and the fair and complete presentation of the
Company’s results with management and representatives of
Deloitte & Touche LLP, our independent registered public
accounting firm for fiscal 2017;
●
discussed
with Deloitte & Touche LLP the matters required to be discussed
by Auditing Standard No. 1301 (Communications with Audit
Committees), as adopted by the Public Company Accounting Oversight
Board; and
●
received
the written disclosures and the letter from Deloitte & Touche
LLP required by the applicable requirements of the Public Company
Accounting Oversight Board regarding Deloitte & Touche
LLP’s communications with the audit committee concerning
independence, and has discussed the independence of Deloitte &
Touche LLP with representatives of Deloitte & Touche
LLP.
Based
on the review and discussions referred to above, the audit
committee recommended to the Company’s Board that the
Company’s audited financial statements be included in the
Company’s Annual Report on Form 10-K for the fiscal year
ended May 31, 2017 for filing with the Securities and Exchange
Commission.
AUDIT COMMITTEE
Dr. Thomas D. Saban, Chair
Dr. Therese K. Crane
Mr. Jeffrey B. Berzina
PROPOSAL NUMBER 2—STOCKHOLDER ADVISORY VOTE TO APPROVE
EXECUTIVE COMPENSATION
As
required by Section 14A of the Securities Exchange Act of 1934, as
amended, we are submitting to stockholders our annual "say-on-pay
proposal," a non-binding advisory vote to approve the compensation
of our named executive officers as described in this proxy
statement.
As
discussed in the Executive and Director Compensation section, our
compensation philosophy is designed to attract and retain
highly-talented individuals, provide rewards for strong business
results and individual performance, and motivate executives to
maximize long-term stockholder returns. The program is competitive
in the marketplace, highly incentive-based to align interests of
executives with those of stockholders, and balanced across
incentives to appropriately mitigate risk.
We
are asking our stockholders to indicate their support and approval
for our named executive officer compensation as described under the
Executive and Director Compensation section of this proxy
statement. We believe that our compensation program for our named
executive officers is designed to create value for our stockholders
over the long-term, and provides for appropriate
pay-for-performance alignment.
For
the reasons summarized above, and as discussed in more detail in
the Executive and Director Compensation section of this proxy
statement, our Board of Directors is asking our stockholders to
vote for the following advisory resolution:
RESOLVED, that the compensation paid to the Company’s named
executive officers, as disclosed in the Company’s Proxy
Statement for the 2017 Annual Meeting of the Stockholders is hereby
approved.
The
say-on-pay vote is advisory, and therefore not binding on our
compensation committee or our Board. Nevertheless, our Board and
our compensation committee value the opinions expressed by
stockholders in their vote on this proposal and will consider the
outcome of the vote in deciding whether to take any action as a
result of the vote and when making future compensation decisions
for our named executive officers.
Board Voting Recommendation
The Board unanimously recommends that the
stockholders vote “FOR” the proposal to approve, on an advisory
basis, the compensation of our named executive
officers.
PROPOSAL NUMBER 3—RATIFICATION OF APPOINTMENT OF OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Based
on the recommendation of the audit committee, the Board has
selected Deloitte & Touche LLP (“Deloitte”) as our
independent registered public accounting firm for the fiscal year
that began June 1, 2017 and has further directed that
management submit the selection of Deloitte for ratification by
stockholders at the annual meeting. Deloitte audited our financial
statements as of and for the year ended May 31, 2017. A
representative of Deloitte is expected to be present at the Annual
Meeting. The representative will have an opportunity to make a
statement if he or she so desires and will be available to respond
to appropriate questions.
None
of the provisions of our Bylaws, other governing documents or
applicable law require stockholder ratification of the selection of
Deloitte as our independent registered public accounting firm. The
Board is submitting the selection of Deloitte to the stockholders
for ratification, however, as a matter of good corporate practice.
If the stockholders fail to ratify the selection, the Board will
reconsider whether or not to retain that firm. Even if the
selection is ratified, the Board in its discretion may direct the
appointment of a different independent registered public accounting
firm at any time during the year if the Board determines that such
a change would be in the best interests of us and our
stockholders.
The
affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the
annual meeting will be required to ratify the selection of
Deloitte.
Independent Registered Public Accounting Firm Fees and
Services
For the
fiscal years ended May 31, 2017 and 2016, Deloitte served as
our independent registered public accounting firm. The following
table presents the aggregate fees incurred for audit and
audit-related services rendered by Deloitte during fiscal years
2017 and 2016, respectively. The fees listed below were
pre-approved by our audit committee.
|
|
|
|
|
|
Audit Fees
(1)
|
$440,000
|
$395,000
|
Audit-Related
Fees
|
71,158(4)
|
91,709(2)
|
Tax
Fees
|
28,600
|
0
|
All Other
Fees
|
|
4,000(3)
|
Total
|
$539,758
|
$490,709
|
___________________________________________________________________________________________
(1)
|
Consists
of fees billed for professional services rendered for the audit of
our year-end financial statements and services in connection with
regulatory filings.
|
|
|
(2)
|
Consists
of $48,000 in fees billed for research and audit scope changes, and
$43,709 in travel, sales tax and other expenses related to audit
services.
|
|
|
(3)
|
Consists
of fees billed for continuing education regarding new revenue
recognition standards.
|
|
|
(4)
|
Consists
of travel, sales tax and other expenses related to audit
services.
|
|
|
The
audit committee, after a review and discussion with Deloitte of the
preceding information, determined that the provision of these
services was compatible with maintaining Deloitte’s
independence.
Audit Committee Pre-Approval Policies and Procedures
The
audit committee adopted pre-approval policies and procedures for
audit and non-audit services on November 30, 2009. Since the date
of adoption, the audit committee has approved all of the services
performed by Deloitte.
Board Voting Recommendation
The Board recommends that stockholders vote
“FOR” the proposal to ratify the appointment of Deloitte
& Touche LLP as our independent registered public accounting
firm for the fiscal year ending on May 31,
2018.
If
the appointment of Deloitte & Touche LLP were not ratified by
the stockholders, the Board would not be required to appoint
another independent registered public accounting firm, but would
give consideration to an unfavorable vote.
OTHER BUSINESS
Management
does not intend to present any matters at the meeting other than
those disclosed in this proxy statement, and we are not presently
aware of any matter that may be presented at the meeting by others.
However, if other matters properly come before the meeting, it is
the intention of the persons named in the enclosed form of proxy to
vote on those matters in accordance with their best
judgment.
DELIVERY OF PROXY MATERIALS TO HOUSEHOLDS
SEC
rules allow us to deliver a single copy of an annual report and
proxy statement to any household at which two or more stockholders
reside. This eliminates duplicate mailings that stockholders living
at the same address receive, and it reduces our printing and
mailing costs.
If
your household would like to revoke your householding consent and
receive single rather than duplicate mailings in the future, please
write to Broadridge Financial Solutions Inc., Householding
Department, at 51 Mercedes Way, Edgewood, New York 11717, or call
800-542-1061. You will be removed from the householding program
within 30 days of receipt of the revocation of your consent. If a
broker or other nominee holds your shares, you may continue to
receive some duplicate mailings. Certain brokers will eliminate
duplicate account mailings by allowing stockholders to consent to
such elimination, or through implied consent if a stockholder does
not request continuation of duplicate mailings. Since not all
brokers and nominees offer stockholders the opportunity to
eliminate duplicate mailings, you may need to contact your broker
or nominee directly to discontinue duplicate mailings from your
broker to your household.
Your
household may have received a single set of proxy materials this
year. If you would like to receive another copy of this
year’s proxy materials, please write to Broadridge Investor
Communications Solutions, Householding Department, 51 Mercedes Way,
Edgewood, New York 11717, or call 800-542-1061.
STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Any stockholder proposal intended to be presented
for consideration at the 2018 Annual Meeting of Stockholders and to
be included in our proxy statement for that meeting must comply
with all applicable rules and regulations of the SEC and be
received in writing by the Corporate Secretary of the Company at
5301 Mt. Rushmore Road, Rapid City, South Dakota
57701 no later than May 4, 2018. The Company reserves
the right to reject, rule out of order, or take other appropriate
action with respect to any proposal that does not comply with these
and other applicable requirements.
By Order of the Board of Directors
|
Ronald L. Shape
|
President and Chief Executive Officer
|
September 1, 2017
|
IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS FOR THE 2017 ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON OCTOBER 3, 2017.
Our Proxy Statement for the 2017 Annual Meeting of
the Stockholders and Annual Report for the year ended May 31, 2017
are available at http://www.proxyvote.com.