UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934
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Filed
by the Registrant x
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Filed
by a Party other than the Registrant o
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Check
the appropriate box:
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¨
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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x
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Definitive
Proxy Statement
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¨
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Definitive
Additional Materials
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¨
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Soliciting
Material Pursuant to §240.14a-12
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Lincoln
Educational Services Corporation
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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x
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No
fee required.
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¨
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is
calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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¨
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Fee
paid previously with preliminary materials.
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¨
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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200
EXECUTIVE DRIVE, SUITE 340
WEST
ORANGE, NJ 07052
TEL:
973-736-9340
FAX:
973-736-1750
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March
23,
2007
Dear
Shareholder:
You
are
invited to attend the 2007 Annual Meeting of Shareholders of Lincoln Educational
Services Corporation to be held on Thursday, April 26, 2007, at the Wilshire
Grand Hotel, 350 Pleasant Valley Way, West Orange, New Jersey 07052, at 10:00
a.m. local time.
At
this
year’s meeting you will be asked to elect nine directors and ratify the
appointment of Deloitte & Touche LLP as our independent registered public
accounting firm for our fiscal year ending December 31, 2007. The
accompanying Notice of Meeting and Proxy Statement describe these matters.
We
urge you to read this information carefully.
Your
board of directors unanimously believes that the election of its nominees
for
directors and the ratification of its selection of independent registered
public
accounting firm are in the best interests of the company and its shareholders
and, accordingly, recommends a vote FOR the election of the nominees for
directors and FOR the ratification of the selection of Deloitte & Touche LLP
as our independent registered public accounting firm.
In
addition to the formal business to be transacted, management will report
on the
progress of our business and respond to comments and questions of general
interest to shareholders.
We
sincerely hope that you will be able to attend and participate in the meeting.
Whether or not you plan to come to the meeting, however, it is important
that
your shares be represented and voted. You may vote your shares by completing
the
accompanying proxy card or giving your proxy authorization via the Internet.
Please read the instructions on the accompanying proxy card for details on
giving your proxy authorization via the Internet.
BY
COMPLETING AND RETURNING THE ACCOMPANYING PROXY CARD OR BY GIVING YOUR PROXY
AUTHORIZATION VIA THE INTERNET, YOU AUTHORIZE MANAGEMENT TO REPRESENT YOU
AND
VOTE YOUR SHARES ACCORDING TO YOUR INSTRUCTIONS. SUBMITTING YOUR PROXY NOW
WILL
NOT PREVENT YOU FROM VOTING IN PERSON AT THE ANNUAL MEETING, BUT WILL ASSURE
THAT YOUR VOTE IS COUNTED IF YOUR PLANS CHANGE AND YOU ARE UNABLE TO ATTEND.
TO
ENSURE THAT YOUR VOTE WILL BE COUNTED, PLEASE CAST YOUR VOTE BEFORE 5:00
P.M.
(EASTERN DAYLIGHT TIME) ON APRIL 25, 2007.
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Sincerely,
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David
F. Carney
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Chairman
and CEO
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LINCOLN
EDUCATIONAL SERVICES CORPORATION
200
Executive Drive, Suite 340
West
Orange, New Jersey 07052
NOTICE
OF
ANNUAL
MEETING OF SHAREHOLDERS
To
be Held on Thursday, April 26, 2007
To
the
Shareholders of Lincoln Educational Services Corporation:
NOTICE
IS HEREBY GIVEN that
the
Annual Meeting of Shareholders of Lincoln Educational Services Corporation,
a
New Jersey corporation (the “Company”), will be held on Thursday, April 26,
2007, at the Wilshire Grand Hotel, 350 Pleasant Valley Way, West Orange,
New
Jersey 07052, at 10:00 a.m. local time. At the annual meeting, shareholders
will
be asked:
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1.
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To
elect nine directors to serve until the Company’s next annual meeting of
shareholders and until their successors are duly elected and
qualified.
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2.
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To
ratify the appointment of Deloitte & Touche LLP as the Company’s
independent registered public accounting firm for the year ending
December 31, 2007.
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3.
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To
transact such other business as may properly come before the annual
meeting or any adjournment or postponement thereof and may properly
be
voted upon.
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The
board
of directors of the Company has fixed the close of business on March 15,
2007 as
the record date for the determination of shareholders entitled to notice
of and
to vote at the annual meeting and any adjournment or postponement
thereof.
All
shareholders are cordially invited to attend the annual meeting in person.
Shareholders of record as of the close of business on March 15, 2007, the
record
date, will be admitted to the annual meeting upon presentation of
identification. Shareholders who own shares of Common Stock beneficially
through
a bank, broker or other nominee will be admitted to the annual meeting upon
presentation of identification and proof of ownership or a valid proxy signed
by
the record holder. A recent brokerage statement or a letter from a bank or
broker are examples of proof of ownership. If you own shares of the Company’s
Common Stock beneficially and want to vote in person at the annual meeting,
you
should contact your broker or applicable agent in whose name the shares are
registered to obtain a broker’s proxy and bring it to the annual meeting in
order to vote.
WHETHER
OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE RETURN YOUR PROXY
(BY
COMPLETING AND RETURNING THE ACCOMPANYING PROXY CARD OR BY GIVING PROXY
AUTHORIZATION VIA THE INTERNET) AS PROMPTLY AS POSSIBLE TO ENSURE YOUR
REPRESENTATION AT THE MEETING. EVEN IF YOU HAVE GIVEN YOUR PROXY, YOU
MAY STILL VOTE IN PERSON IF YOU ATTEND THE ANNUAL MEETING. TO ENSURE THAT
YOUR VOTE WILL BE COUNTED, PLEASE CAST YOUR VOTE BEFORE 5:00 P.M. (EASTERN
DAYLIGHT TIME) ON APRIL 25, 2007.
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By
Order of the Board of Directors
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Kenneth
M. Swisstack
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Corporate
Secretary
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West
Orange, New Jersey
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March
23, 2007
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Table
of Contents
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LINCOLN
EDUCATIONAL SERVICES CORPORATION
200
Executive Drive, Suite 340
West
Orange, New Jersey 07052
PROXY
STATEMENT
FOR
ANNUAL
MEETING OF SHAREHOLDERS
To
be Held
Thursday,
April 26, 2007
GENERAL
This
Proxy Statement is provided to the shareholders of Lincoln Educational Services
Corporation, a New Jersey corporation (the “Company”), to solicit proxies, in
the form enclosed, for use at the Annual Meeting of Shareholders of the Company
to be held on Thursday, April 26, 2007, at the Wilshire Grand Hotel, 350
Pleasant Valley Way, West Orange, New Jersey 07052, at 10:00 a.m. local time,
and any and all adjournments or postponements thereof. The board of directors
knows of no matters to come before the annual meeting other than those described
in this Proxy Statement. This Proxy Statement and the enclosed form of proxy
are
first being mailed to shareholders on or about March 26, 2007.
Solicitation
This
solicitation is made by mail on behalf of the board of directors of the Company.
The Company will pay for the costs of the solicitation. Further solicitation
of
proxies may be made, including by mail, telephone, fax, in person or other
means, by the directors, officers or employees of the Company or its affiliates,
none of whom will receive additional compensation for such solicitation.
The
Company will reimburse banks, brokerage firms and other custodians, nominees
and
fiduciaries for reasonable expenses incurred by them in sending proxy materials
to their customers or principals who are the beneficial owners of shares
of the
Company’s common stock, no par value per share (the “Common
Stock”).
Voting
Procedures
Only
those holders of Common Stock of record as of the close of business on March
15,
2007, the record date, will be entitled to notice of and to vote at the annual
meeting. A total of 25,460,995 shares of Common Stock were issued and
outstanding as of the record date. Each share of Common Stock entitles its
holder to one vote. Cumulative voting of shares of Common Stock is not
permitted.
Shareholders
of record can vote either in person at the annual meeting or by proxy whether
or
not they attend the meeting. To vote by proxy, a shareholder must either:
(a)
fill out the enclosed proxy card, date and sign it, and return it in the
enclosed postage-paid envelope, or (b) vote by Internet (instructions are
on the
proxy card).
The
presence in person or by proxy of holders of a majority of the outstanding
shares of Common Stock entitled to vote will be necessary to constitute a
quorum
to transact business at the annual meeting. Abstentions and broker non-votes
will be treated as present for purposes of determining the existence of a
quorum. At the annual meeting, directors will be elected by a plurality of
the
votes cast and a majority of the votes cast will be required to ratify the
appointment of Deloitte & Touche LLP as the Company’s independent registered
public accounting firm. Abstentions, however, will not be counted as votes
“for”
or “against” the election of directors or “for” or “against” the ratification of
the appointment of Deloitte & Touche LLP. It is expected that brokers will
have discretionary power to vote on each of the proposals.
Shares
of
Common Stock represented by properly executed proxies in the form enclosed
that
are timely received by the Secretary of the Company and not validly revoked
will
be voted as specified on the proxy. If no specification is made on a properly
executed and returned proxy, the shares represented thereby will be voted
FOR
the election of each of the nine nominees for director named in this Proxy
Statement and FOR the ratification of the appointment of Deloitte & Touche
LLP as the independent registered public accounting firm of the Company.
If any
other matters properly come before the annual meeting, it is the intention
of
the persons named in the accompanying proxy to vote such proxies in their
discretion. In order to be voted, each proxy must be filed with the Secretary
of
the Company prior to exercise.
Revocability
of Proxies
Shareholders
may revoke a proxy at any time before the proxy is exercised. This may be
done
by filing a notice of revocation of the proxy with the Secretary of the Company,
by filing a later-dated proxy with the Secretary of the Company or by voting
in
person at the annual meeting.
PROPOSAL
NUMBER ONE—ELECTION OF DIRECTORS
Shareholders
will be asked at the annual meeting to elect nine directors. Our bylaws allow
for a minimum of three directors and a maximum of 11 directors. Each elected
director will hold office until the next annual meeting of shareholders and
until the director’s successor is duly elected and qualified. The board of
directors knows of no reason why any of the nominees would be unable or
unwilling to serve, if elected, but if any nominee should for any reason
be
unable or unwilling to serve, if so elected, the proxies received by the
Company
will be voted for the election of such other person for the office of director
as the board of directors may recommend in the place of such
nominee.
Shareholders
may withhold authority to vote their proxies for either (i) the entire
slate of nominated directors by checking the box marked WITHHOLD AUTHORITY
on
the proxy card, or (ii) any one or more of the individual nominees, by
following the instructions on the proxy card. Instructions on the accompanying
proxy card that withhold authority to vote for one or more of the nominees
will
cause any such nominee to receive fewer votes.
Upon
recommendation of the Nominating and Corporate Governance Committee, the
following nine persons have been selected by the board of directors as nominees
for election to the board of directors: David F. Carney, Alexis P. Michas,
James
J. Burke, Jr., Steven W. Hart, Jerry G. Rubenstein, Paul E. Glaske, Peter
S.
Burgess, J. Barry Morrow and Celia Currin. All of the nominees are incumbent
directors. Additional information about these nominees is provided in the
table
and biographical information that follow.
Required
Vote
A
plurality of the votes cast at the annual meeting is required for the election
of directors.
The
board of directors unanimously recommends a vote FOR
each of the named nominees.
BOARD
OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR
MANAGEMENT
The
following sets forth certain information concerning the directors, executive
officers and senior management of the Company as of the record date for the
annual meeting:
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Name
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Age
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Position
Held
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David
F. Carney (1)
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67
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Chief
Executive Officer and Chairman of the Board of
Directors
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Lawrence
E. Brown
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59
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Vice
Chairman
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Shaun
E. McAlmont
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41
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President,
Chief Operating Officer
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Scott
M. Shaw
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44
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Executive
Vice President
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Cesar
Ribeiro
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43
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Senior
Vice President, Chief Financial Officer and Treasurer
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Alexis
P. Michas (1) (3) (4)
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49
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Director
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James
J. Burke, Jr. (1) (3) (4)
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55
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Director
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Steven
W. Hart (3)
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50
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Director
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Jerry
G. Rubenstein (2) (5)
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76
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Director
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Paul
E. Glaske (3) (4) (5)
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73
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Director
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Peter
S. Burgess (2) (5)
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64
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Director
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J.
Barry Morrow (4) (5)
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54
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Director
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Celia
Currin (2) (5)
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58
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Director
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_________________
(1) Member
of
the Executive Committee.
(2) Member
of
the Audit Committee.
(3) Member
of
the Compensation Committee.
(4) Member
of
the Nominating and Corporate Governance Committee.
(5) Independent
director.
David
F. Carney
joined
us in 1999 as Chief Executive Officer and Chairman of the board of directors,
prior to which he served as a consultant following the sale of his two school
companies to Computer Learning Centers, Inc. Previously, Mr. Carney
spent 20 years in various capacities with British Oxygen Group Limited,
including CFO and Vice President of Development of the Education Services
Division which operated 25 technical schools. From 1990 to 1992, Mr. Carney
was President of the Massachusetts Association of Private Career Schools.
Mr. Carney received a B.S. from Seton Hall University. Mr. Carney has
over 30 years of experience in the career education industry.
Lawrence
E. Brown
joined
us in 1973 and currently serves as our Vice Chairman. Prior to taking this
position, Mr. Brown held various positions with us including Assistant
Director, Executive Director, Regional Vice President, Vice President of
Operations, Executive Vice President and President / Chief Operating Officer.
He
has also served as President of the Private Career Schools of New Jersey
and
State Captain of the Skills 2000 lobbying effort for the reauthorization
of the
Higher Education Act of 1992. Mr. Brown received a B.A. from Northern
Illinois University. Mr. Brown has over 34 years of experience in the
career education industry.
Shaun
E. McAlmont
joined
us in 2005 and currently serves as our President and Chief Operating Officer.
Prior to taking this position, Mr. McAlmont served as Executive Vice President
and President of Online and Group Vice President of the Company. Prior to
joining Lincoln, Mr. McAlmont spent 6 years as an executive with the Alta
Colleges Corporation serving as President of Westwood College Online and
prior
to that as Regional Vice President of five Westwood College Campuses. Mr.
McAlmont earned his B.S. from Brigham Young University and his M.A. degree
in
Education Administration from the University of San Francisco.
Scott
M. Shaw
joined
us in 2001 and currently serves as our Executive Vice President. Prior to
taking
this position, Mr. Shaw served as Senior Vice President of Strategic Planning
and Business Development. Prior to joining Lincoln, Mr. Shaw was a partner
at
Stonington Partners, Inc., where he had been since 1994. As a partner at
Stonington, Mr. Shaw was responsible for identifying, evaluating and
acquiring companies and then assisting in the oversight of these companies
through participation on the board of directors. In addition, Mr. Shaw
worked closely with senior management to develop long-term strategic plans,
to
evaluate acquisition and new investment opportunities, to assist with
refinancings, and to execute on the final sale of the company either to the
public or to another company. Mr. Shaw also served as a consultant to
Merrill Lynch Capital Partners Inc., a private investment firm associated
with
Merrill Lynch & Co., Inc. from 1994 through 2000. Mr. Shaw holds an
M.B.A. from the Wharton School of Business and a B.A. from Duke
University.
Cesar
Ribeiro
joined
us in 2004 and currently serves as our Senior Vice President, Chief Financial
Officer and Treasurer. From September 2002 through June 2004,
Mr. Ribeiro was self-employed providing both consulting services and
private money management services. Prior to that, he was an audit partner
with
Arthur Andersen LLP, where he had been since 1987. Mr. Ribeiro holds a B.S.
from Rutgers University.
Alexis
P. Michas
has
served on our board of directors since 1999. He has been the Managing Partner
and a director of Stonington Partners, Inc. since 1996. Mr. Michas also
served as a consultant to Merrill Lynch Capital Partners, Inc., a private
investment firm associated with Merrill Lynch & Co., Inc., from
1994 through 2000. Mr. Michas received a B.A. from Harvard University and
an M.B.A. from Harvard University Graduate School of Business Administration.
Mr. Michas also is a director of BorgWarner Inc.,
PerkinElmer, Inc. and Air Tran Airways, Inc.
James
J. Burke, Jr.
has
served on our board of directors since 1999. He has been a partner and director
of Stonington Partners Inc. since 1994. Mr. Burke also served as a
consultant to Merrill Lynch Capital Partners, Inc., a private investment
firm associated with Merrill Lynch & Co., Inc., from 1994 through
2000. He received a B.A. from Brown University and an M.B.A with Distinction
from Harvard University Graduate School of Business Administration.
Mr. Burke also serves on the board of directors of Ann Taylor Stores
Corporation.
Steven
W. Hart
has
served on our board of directors since 1999. Mr. Hart is a Managing
Director of Hart Capital LLC, a private investment fund, which is the managing
member of Five Mile River Capital Partners LLC. Mr. Hart received a B.A.
from Wesleyan University and an M.B.A. from Stanford University Graduate
School
of Business.
Jerry
G. Rubenstein
has
served on our board of directors since 1999. Mr. Rubenstein has organized
and managed several entrepreneurial ventures, including OMNI Management
Associates, where he has served as President since 1979. Mr. Rubenstein
currently serves on the boards of directors of The Philadelphia Chamber Music
Society (as Chairman), Marlboro Music School, Inc., and Foreign Policy
Research Institute. Mr. Rubenstein received his bachelor of business
administration from the City College of New York.
Paul
E. Glaske
has
served on our board of directors since 2004. Mr. Glaske was Chairman and
Chief Executive Officer from April 1992 until his retirement in 1999 of
Blue Bird Corporation, a leading manufacturer of school buses, motorhomes
and a
variety of other vehicles. He currently serves on the board of directors
of
BorgWarner Inc., Camcraft, Inc., Energy Transfer Partners and
Energy
Transfer Equities.
He is
also on the Senior Council of the Texas Association of Business and is Treasurer
of the Board of Trustees of LeTourneau University. Mr. Glaske earned his
B.S. in Business Administration from Bob Jones University and his M.B.A.
from
Pepperdine University.
Peter
S. Burgess, CPA
has
served on our board of directors since 2004. In 1999, Mr. Burgess retired
from Arthur Andersen LLP where he was an accounting and business advisory
partner serving numerous manufacturing, insurance and financial services
enterprises. Following his retirement, he has provided consulting services
specializing in litigation support, mergers and acquisitions and audit committee
responsibilities under securities exchange requirements and the Sarbanes-Oxley
Act. Mr. Burgess is also a director and chair of the audit committees of
PMA Capital Corporation and John Hancock Trust and Funds II. He also serves
as a
director of Duncaster Inc., a not-for-profit continuing care retirement
community. Mr. Burgess earned a B.S. in Business Administration from Lehigh
University.
J.
Barry Morrow was
elected to our board of directors on February 24, 2006. He served as the
Chief
Executive Officer of Collegiate Funding Services from 2002 until 2006 when
the
company was merged with JPMorgan Chase. Mr. Morrow held the position of
President and Chief Operating Officer of Collegiate Funding from 2000 to
2002.
Prior to joining Collegiate Funding Services, Mr. Morrow served with the
U.S.
Department of Education as the General Manager of Financial Services for
the
Office of Student Financial Assistance and with SallieMae as Vice President
of
Regional Operations. Mr. Morrow holds a B.A. from Virginia Tech and a M.A.
in
public administration from George Washington University.
Celia
Currin
was
elected to our board of directors on February 24, 2006. Ms. Currin is the
Founder and Principal of BenchStrength Marketing, a marketing consultancy
group
focused on the information and media industries. Prior to founding BenchStrength
in 2003, Ms. Currin spent 25 years in a variety of senior management roles
with
Dow Jones & Company. She is president of the board of directors of Poets
& Writers, the largest non-profit US service organization for writers. Ms.
Currin received her M.B.A. from Harvard Business School and her B.S from
the
University of Oregon.
Information
on Board of Directors and its
Committees
Directors
are expected to attend our annual meeting of stockholders, board meetings
and
meetings of the committees on which they serve. They are also expected to
prepare for meetings in advance and to dedicate the time at each meeting
as
necessary to properly discharge their responsibilities. Informational materials,
useful in preparing for meetings, are distributed in advance of each meeting.
In
2006, there were four meetings of the Board, and each of the directors attended
at least 75% of the meetings of the Board and committees on which he or she
served. In addition, Directors Burgess, Burke, Carney, Currin, Hart, Michas,
Morrow and Rubenstein attended our 2006 Annual Meeting of
Stockholders.
The
board
of directors has an Audit Committee, a Compensation Committee and a
Nominating & Corporate Governance Committee.
Audit
Committee
The
Audit
Committee consists of Directors Burgess (Chairman), Rubenstein and Currin.
It
held six meetings in 2006. The board of directors has adopted a written charter
for the Audit Committee. The charter of the Audit Committee is available
on our
website at www.lincolneducationalservices.com.
The
Audit Committee is directly responsible, among other things, for our accounting
and financial reporting processes; the quality and integrity of our financial
statements; the quality and integrity of our system of internal controls;
our
compliance with laws and regulations; our independent auditor's qualifications
and independence; and the audit of our financial statements by a qualified
independent auditor.
To
fulfill these responsibilities, the audit committee will be aware of the
current
areas of greatest financial risk to us and understand management's assessment
and management of the risks; consider the effectiveness of our disclosure
controls and procedures to promote timely, accurate, compliant and meaningful
disclosure in our periodic reports filed with the Securities and Exchange
Commission (“SEC”); periodically review with the independent auditors their
assessment as to the adequacy of our structure of internal controls over
financial accounting and reporting, and their qualitative judgments as to
the
accounting principles employed and related disclosures by us and the conclusions
expressed in our financial reports; review with management and the independent
auditors our accounting policies and practices to ensure they meet the
requirements with respect to the FASB, the SEC and the American Institute
of
Certified Public Accountants; select, evaluate and, if necessary, replace
our
independent auditors; actively engage in dialogue with the independent auditors
with respect to any disclosed relationships or services that may impact the
objectivity or independence of the independent auditors; engage advisors,
as the
committee determines is necessary, to carry out its duties; meet with the
independent auditors, the internal auditors and senior management to review
the
scope and methodology of the proposed audit; discuss with management policies
and practices regarding earnings press releases, as well as financial
information and earnings guidelines provided to analysts and rating agencies;
set clear hiring policies with respect to any current or former employees
of our
independent auditors; and establish procedures for the receipt, retention
and
treatment of complaints we receive regarding our internal accounting controls
or
auditing matters and for the confidential, anonymous submission by employees
of
their concerns regarding our internal accounting controls and auditing
matters.
The
board
of directors has determined that each of Messrs. Burgess and Rubenstein is
an “audit committee financial expert” within the meaning of the regulations of
the SEC. Messrs. Burgess and Rubenstein and Ms. Currin are independent
directors under the Sarbanes-Oxley Act of 2002 and the Nasdaq listing
standards.
Nominating &
Corporate
Governance
Committee
The
Nominating & Corporate Governance Committee consists of Directors Michas
(Chairman), Burke, Glaske and Morrow. The composition of the Nominating and
Corporate Governance Committee does not, and is not required to, satisfy
the
independence requirements of The Nasdaq Global Market because we are a
controlled company. The Committee held two meetings in 2006. The charter
for the
Nominating & Corporate Governance Committee is published on our website
at www.lincolneducationalservices.com.
The
Nominating & Corporate Governance Committee is responsible for, among
other things, making recommendations to the board of directors with respect
to
corporate governance policies and reviewing and recommending changes to the
Company’s corporate governance guidelines that have been adopted by the board of
directors. The Committee also recommends to the board of directors candidates
for nomination for election as directors of the Company and appointments
of
directors as members of the committees of the board of directors.
The
Nominating & Corporate Governance Committee considers candidates for
directors suggested by shareholders for elections to be held at an annual
meeting of shareholders. Shareholders can suggest qualified candidates for
directors by complying with the advance notification and other requirements
of
the Company’s Bylaws regarding director nominations. Director nomination
materials submitted in accordance with the Bylaw procedures will be forwarded
to
the Chairman of the Nominating & Corporate Governance Committee for review
and consideration. Director nominees suggested by shareholders will be evaluated
in the same manner, and subject to the same criteria, as other nominees
evaluated by the Committee. The Committee also considers candidates for director
suggested by its members, other directors and management and may from time
to
time retain a third-party executive search firm to identify director candidates
for the Committee.
Generally,
once the Nominating & Corporate Governance Committee has identified a
prospective nominee, the Committee makes an initial determination as to whether
to conduct a full evaluation of the candidate based on information provided
to
the Committee with the recommendation of the candidate, as well as the
Committee’s own knowledge of the candidate, which may be supplemented by
inquiries to the person making the recommendation or others. The initial
determination is based primarily on the need for additional directors to
fill
vacancies or expand the size of the board of directors and the likelihood
that
the candidate can satisfy the evaluation factors described below. If the
Committee determines, in consultation with the Chairman of the Board and
other
directors, as appropriate, that additional consideration is warranted, it
may
request a third-party search firm to gather additional information about
the
candidate’s background and experience and to report its findings to the
Committee. The Committee then evaluates the candidate against the standards
and
qualifications set out in guidelines for director candidates adopted by the
board of directors, including the nominee’s management, leadership and business
experience, skill and diversity, such as financial literacy and knowledge
of
directorial duties, and integrity and professionalism.
The
Committee also considers such other relevant factors as it deems appropriate,
including the current composition of the board of directors, the balance
of
management and independent directors, the need for particular expertise (such
as
Audit Committee expertise) and the evaluations of other prospective nominees.
In
connection with this evaluation, the Committee determines whether to interview
the prospective nominee, and, if warranted, one or more members of the
Committee, and others as appropriate, interview prospective nominees in person
or by telephone. After completing this evaluation and interview, the Committee
makes a recommendation to the full board of directors as to the persons who
should be nominated by the board of directors and the board of directors
determines the nominees after considering the recommendation of the
Committee.
Compensation
Committee
The
Compensation Committee consists of Directors Burke (Chairman), Glaske, Hart
and
Michas. The composition of the compensation committee does not, and is not
required to, satisfy the independence requirements of The Nasdaq Global Market
because we are a controlled company. The Compensation Committee held four
meetings in 2006. The Compensation Committee has the authority to develop
and
maintain a compensation policy and strategy that creates a direct relationship
between pay levels and corporate performance and returns to stockholders;
recommend compensation and benefit plans to our board for approval; review
and
approve annual corporate and personal goals and objectives to serve as the
basis
for the chief executive officer's compensation, evaluate the chief executive
officer's performance in light of the goals and, based on such evaluation,
determine the chief executive officer's compensation; determine the annual
total
compensation for our named executive officers; with respect to our equity-based
compensation plans, approve the grants of stock options and other equity-based
incentives as permitted under our compensation plans; review and recommend
compensation for non-employee directors to our board; and review and recommend
employment agreements, severance arrangements and change of control plans
that
provide for benefits upon a change in control, or other provisions for our
executive officers and directors, to our board. The Compensation Committee
also
has the power to delegate its authority and duties to subcommittees or
individual members of the committee, as it deems appropriate in accordance
with
applicable laws and regulations. The charter for the Compensation Committee
is
published on our website at www.lincolneducationalservices.com.
Compensation
Committee Interlocks And Insider
Participation
Messrs. Burke,
Glaske, Michas and Hart served on the Compensation Committee during the 2006
fiscal year. There were no Compensation Committee interlocks or insider
(employee) participation during 2006.
SECURITY
OWNERSHIP OF MANAGEMENT
AND
PRINCIPAL SHAREHOLDERS
The
following tables provide information regarding the beneficial ownership of
Common Stock as of the record date for the annual meeting by (1) each of
the Company’s directors, (2) each of the named executive officers,
(3) all directors and executive officers as a group, and (4) each
person known by the Company to be the beneficial owner of more than 5% of
the
outstanding shares of Common Stock. This table is based on information provided
to the Company or filed with the SEC by the Company’s directors, executive
officers and principal shareholders. Except as otherwise indicated, the Company
believes, based on information furnished by such owners, that the beneficial
owners of the Common Stock listed below have sole investment and voting power
with respect to such shares, subject to community property laws where
applicable.
CERTAIN
BENEFICIAL OWNERS
As
of
March 15, 2007, the only persons or groups that are known to the Company
to be
the beneficial owners of more than five percent of the outstanding common
stock
are:
|
Name
of Beneficial Owner
|
Number
of Shares of
Common
Stock
Beneficially
Owned
|
Percent
of Common Stock
Beneficially
Owned on
December
31, 2006
|
|
Back
to School Acquisition L.L.C. (1)
|
20,438,986
|
76.6%
|
|
Hart
Capital LLC (2)
|
2,179,600
|
8.2%
|
_____________________
|
(1)
|
Based
on the information reported in a statement on Schedule 13G/A filed
with the SEC on February 14, 2007 by Stonington
Capital Appreciation 1994 Fund, L.P., Stonington Partners, L.P.,
Stonington Partners, Inc., Stonington Partners, Inc. II (collectively,
“Stonington”) and Back to School Acquisition, L.L.C. (“BSA”). Stonington
controls and has a 100% economic interest in BSA. BSA (i) owns
18,165,500
shares; (ii) has the power to direct the voting and, in certain
circumstances the disposition, of 2,179,600 shares through a voting
agreement with Five Mile River Capital Partners LLC (of which Hart
Capital
LLC is the managing member), (iii) has the power to direct the
voting and,
in certain circumstances the disposition, of 54,488 shares (which
includes
11,500 shares issuable pursuant to currently exercisable options)
through
a stockholders agreement with Steven W. Hart and the Steven W.
Hart 2003
Grantor Retained Annuity Trust (which terminated by its own terms
on
December 24, 2005), (iv) upon
the exercise of currently exercisable options held by the Steven
W. Hart
2005 Grantor Retained Annuity Trust to purchase 18,795 shares of
our
common stock, will have the power to direct the voting and, in
certain
circumstances the disposition, of such shares through a stockholders
agreement with the Steven W. Hart 2005 Grantor Retained Annuity
Trust,
and (v) upon the exercise of currently exercisable options held
by the
Steven W. Hart 2006 Grantor Retained Annuity Trust to purchase
20,603
shares of our common stock, will have the power to direct the voting
and,
in certain circumstances the disposition, of such shares through
a
stockholders agreement with the Steven W. Hart 2006 Grantor Retained
Annuity Trust. Alexis P. Michas is the Managing Partner of Stonington
and
James J. Burke, Jr. is a Partner of Stonington. Both are members
of our
board of directors. Both Back to School Acquisition, L.L.C. and
Stonington
have their business address at 540 Madison Avenue, 25th
Floor, New York, New York 10022. We have not attempted to independently
verify any of the foregoing information, which is based solely
upon the
information contained in the Schedule
13G/A.
|
|
(2)
|
Based
on the information reported in a statement on Schedule 13G/A filed
with the SEC on February 6, 2007 by Steven W. Hart, Five Mile River
Capital Partners LLC (“FMRCP”) and Hart Capital LLC (“Hart Capital”).
These shares are owned by FMRCP, of which Hart Capital is the managing
member. Hart Capital disclaims beneficial ownership of all shares
of
common stock held by FMRCP. FMRCP is party to a Stockholders’ Agreement
with Back to School Acquisition, L.L.C. (“BSA”) and the Company (the
“FMRCP Stockholders’ Agreement”). Pursuant to the FMRCP Stockholders’
Agreement, BSA has the power to direct the voting and, under certain
circumstances, through the exercise of drag-along rights, the disposition,
of all shares of common stock held by FMRCP. These shares are also
reported by Steven W. Hart and Hart Capital LLC under shared voting
power
and shared dispositive power. Steven W. Hart, a member of our board
of directors, is a Managing Director of Hart Capital. Both FMRCP
and Hart
Capital have their business address at 131
Rowayton Avenue, Rowayton, Connecticut 06853.
We have not attempted to independently verify any of the foregoing
information, which is based solely upon the information contained
in the
Schedule 13G/A.
|
The
following table sets forth information as to the beneficial ownership of
shares
of common stock of each director, including each nominee for director, and
each
named executive officer and all directors and executive officers of the Company,
as a group. Except as otherwise indicated in the footnotes to the table,
each
individual has sole investment and voting power with respect to the shares
of
common stock set forth.
|
Name
and Address of Beneficial Owner (1)
|
Number
of Shares of Common Stock Beneficially Owned
|
Percent
of Common Stock
Beneficially
Owned
As
of March 15, 2007
|
|||||
|
David
F. Carney (2) (3)
|
533,943
|
2.0%
|
|
||||
|
Lawrence
E. Brown (2) (4)
|
347,697
|
1.3%
|
|
||||
|
Scott
M. Shaw (2) (5)
|
332,682
|
1.2%
|
|
||||
|
Cesar
Ribeiro (2) (6)
|
21,000
|
*
|
|||||
|
Shaun
E. McAlmont (2) (7)
|
3,000
|
*
|
|||||
|
Alexis
P. Michas (8)
|
20,443,836
|
76.6%
|
|
||||
|
James
J. Burke, Jr. (9)
|
20,443,836
|
76.6%
|
|
||||
|
Steven
W. Hart (10)
|
2,273,486
|
8.5%
|
|
||||
|
Jerry
G. Rubenstein (11)
|
48,490
|
*
|
|||||
|
Paul
E. Glaske (12)
|
7,350
|
*
|
|||||
|
Peter
S. Burgess (13)
|
6,850
|
*
|
|||||
|
J.
Barry Morrow (14)
|
5,406
|
*
|
|||||
|
Celia
Currin (15)
|
5,406
|
*
|
|||||
|
All
executive officers and directors as a group
|
21,765,360
|
81.6%
|
|
||||
_________________
|
*
|
Less
than 0.5%.
|
|
(1)
|
“Beneficial
ownership” is a term broadly defined by the SEC in Rule 13d-3 under
the Exchange Act, and includes more than the typical forms of stock
ownership, that is, stock held in the person’s name. The term also
includes what is referred to as “indirect ownership,” meaning ownership of
shares as to which a person has or shares investment or voting
power. For
purpose of this table, a person or group of persons is deemed to
have
“beneficial ownership” of any shares as of a given date that such person
or group has the right to acquire within 60 days after such date.
|
|
(2)
|
Unless
otherwise noted, the business address for each of the executive
officers
is 200 Executive Drive, Suite 340, West Orange, New Jersey 07052.
|
|
(3)
|
Includes
215,288 shares of common stock currently held of record and options
to
purchase 318,655 shares of common stock.
|
|
(4)
|
Includes
81,626 shares of common stock currently held of record and options
to
purchase 266,071 shares of common stock (10,000 of these options
are held
by Laurie Brown, to whom Lawrence E. Brown is married).
|
|
(5)
|
Includes
65,626 shares of common stock currently held of record and options
to
purchase 267,056 shares of common stock.
|
|
(6)
|
Includes
options to purchase 21,000 shares of common stock.
|
|
(7)
|
Includes
options to purchase 3,000 shares of common stock.
|
|
(8)
|
Alexis
P. Michas serves on our board of directors and is the Managing
Partner of
Stonington, our largest shareholder, which controls, through its
controlled subsidiary Back to School Acquisition, L.L.C., 76.6%
of our
common stock. Mr. Michas disclaims beneficial ownership of all but
4,850 shares of our common stock. Mr. Michas’ business address is 540
Madison Avenue, 25th
Floor, New York, New York 10022.
|
|
(9)
|
James
J. Burke, Jr. serves on our board of directors and is a Partner
of
Stonington, our largest shareholder, which controls, through its
controlled subsidiary Back to School Acquisition, L.L.C., 76.6%
of our
common stock. Mr. Burke disclaims beneficial ownership of all but
4,850 shares of our common stock. Mr. Burke’s business address is 540
Madison Avenue, 25th
Floor, New York, New York 10022.
|
|
(10)
|
Mr. Hart
serves on our board of directors and is a Managing Director of
Hart
Capital LLC, the Managing Member of Five Mile River Capital Partners
LLC
(“FMRCP”). FMRCP is our second largest shareholder and owns 8.2% of our
common stock as described in footnote 2 of the “Certain Beneficial
Owners” table on page 6 of this Proxy Statement. The
amount listed in the table includes shares of common stock held
by
FMRCP
of
which Mr. Hart may be deemed to be the beneficial owner by virtue
of his
ownership of membership interests in, and/or position as Managing
Director
of, Hart Capital LLC. Mr. Hart disclaims beneficial ownership of
these shares of common stock.
Mr. Hart directly owns 42,988 shares of our common stock and options
to
purchase 11,500 shares of our common stock. Mr. Hart is a party
to a
Stockholders’ Agreement, with Back to School Acquisition, L.L.C. (“BSA”),
the Steven W. Hart 2003 Grantor Retained Annuity Trust (which terminated
by its own terms on December 24, 2005) (the “2003 Trust”) and the Company
(the “Non-FMRCP Stockholders’ Agreement”). Pursuant to the Non-FMRCP
Stockholders’ Agreement, BSA has the power to direct the voting and, under
certain circumstances, through the exercise of drag-along rights,
the
disposition, of all shares of common stock held by Mr. Hart. Mr.
Hart
beneficially owns options to purchase 18,795 shares of Common Stock
held
in the Steven W. Hart 2005 Grantor Retained Annuity Trust (the
“2005
Trust”) and options to purchase 20,603 shares of Common Stock held in
the
Steven W. Hart 2006 Grantor Retained Annuity Trust (the “2006 Trust”), as
to both of which trusts Mr. Hart serves as co-trustee. The options
are
exercisable at $1.5482 per share and expire on June 21, 2009. Upon
exercise of any of the options to purchase shares of Common Stock
held by
the 2005 Trust or the 2006 Trust, the 2005 Trust and/or the 2006
Trust, as
the case may be, will be required to enter into a Stockholders’ Agreement
with the Company and BSA pursuant to which BSA will have the power
to
direct the voting and, under certain circumstances, through the
exercise
of drag-along rights, the disposition, of all shares of Common
Stock held
by the 2005 Trust and the 2006 Trust. The number presented above
does not
include 10,364 shares of common stock held in trusts for the benefit
of
Mr. Hart’s children, as to which Mr. Hart’s wife serves as sole trustee,
and 2,000 shares held by Mr. Hart’s wife, as to which he disclaims
beneficial ownership. Mr. Hart’s business address is 131 Rowayton Avenue,
Rowayton, Connecticut 06853.
|
|
(11)
|
Jerry
G. Rubenstein serves on our board of directors and is the beneficial
owner
of 48,490 shares of our common stock. The amount listed in the
table
includes options to purchase 33,070 shares of common stock.
Mr. Rubenstein’s business address is Omni Management Associates, Two
Bala Plaza, Suite 300, Bala Cynwyd, Pennsylvania 19004.
|
|
(12)
|
Paul
E. Glaske serves on our board of directors. Mr. Glaske’s business
address is 18136 South Shore Drive, Flint, Texas 75762.
|
|
(13)
|
Peter
S. Burgess serves on our board of directors. Mr. Burgess’ business
address is 88 Sherwood Drive, Glastonbury, Connecticut 06033.
|
|
(14)
|
J.
Barry Morrow serves on our board of directors. Mr. Morrow’s business
address is 23729 Grasty Place, Middleburg, Virginia
20117.
|
|
(15)
|
Celia
Currin serves on our board of directors. Ms. Currin’s business
address is 33 East End Avenue, New York, New York
10028.
|
Section 16(a) Beneficial
Ownership Reporting
Compliance
Section 16(a) of
the Securities Exchange Act of 1934, as amended, requires the Company’s
directors and officers and beneficial owners of 10% or more of the Company’s
Common Stock to file reports of ownership of, and transactions in, the Company’s
securities with the Securities and Exchange Commission, the Nasdaq Global
Market
and the Company. Based solely on the Company’s review of copies of such forms
filed pursuant to Section 16(a) of the Securities Exchange Act of 1934, the
Company believes that all Securities and Exchange Commission filing requirements
applicable to the Company’s directors and executive officers and beneficial
owners of 5% or more of the Company’s Common Stock for 2006 were timely
met.
COMPENSATION
DISCUSSION AND ANALYSIS
This
section provides an overview and analysis of our compensation program and
policies, the material compensation decisions we have made under those programs
and policies, and the material factors that we considered in making those
decisions. Later in this proxy statement under the heading “Additional
Information Regarding Executive Compensation” you will find a series of tables
containing specific information about the compensation earned or paid in
2006 to
the following individuals, whom we refer to as our named executive officers:
|
•
|
David
F. Carney, Chairman and Chief Executive
Officer
|
|
•
|
Lawrence
E. Brown, Vice Chairman
|
|
•
|
Shaun
E. McAlmont, President and Chief Operating
Officer
|
|
•
|
Scott
M. Shaw, Executive Vice President
|
|
•
|
Cesar
Ribeiro, Senior Vice President, Chief Financial Officer and
Treasurer
|
The
discussion below is intended to help you understand the detailed information
provided in those tables and put that information into context within our
overall compensation program.
Compensation
Committee
The
Compensation Committee of the Board of Directors (the “Committee”) has
responsibility for establishing, implementing and monitoring adherence with
our
compensation program. The role of the Committee is to oversee, on behalf
of the
Board and for the benefit of the Company and its shareholders, our compensation
and benefit plans and policies, administer our stock plans (including reviewing
and approving equity grants to directors and executive officers) and review
and
approve annually all compensation decisions relating to our named executive
officers. The Committee’s charter requires that the Committee meet a minimum of
two times annually to review executive compensation programs, approve
compensation levels and performance targets, review management performance,
and
approve final executive bonus distributions. The Committee met four times
in
2006.
Compensation
Philosophy and Objectives
The
Company and the Committee believe that compensation paid to executive officers
should be closely aligned with our performance on both a short-term and
long-term basis, and that such compensation should assist us in attracting
and
retaining key executives critical to our long-term success.
Our
compensation program is designed to offer executive officers competitive
compensation based on our performance, our unique niche, strategy, business
model and execution and on the individual’s contribution, performance and
leadership. Our compensation policies are intended to motivate, reward and
retain highly qualified executives for long-term strategic management and
the
enhancement of shareholder value, to support a performance-oriented environment
that rewards achievement of specific internal Company goals, and to attract
and
retain executives whose abilities are critical to our long-term success and
competitiveness.
The
Compensation Committee has reviewed all components of the compensation for
the
named executive officers, including salary, bonus, equity and long-term
incentive compensation, accumulated realized and unrealized stock options,
the
dollar value to the executive and cost to the Company of all perquisites,
and
the actual projected payout obligations under potential severance and
change-in-control scenarios.
Setting
Executive Compensation
We
intend
to continue our strategy of compensating our executives through programs
that
emphasize performance-based incentive compensation. We have structured annual
and long-term cash and non-cash executive compensation to motivate executives
to
achieve the business goals set by the Company and rewards the executives
for
achieving such goals. For the named executive officers, the current compensation
package includes a base salary, an annual cash incentive and grants of stock
options. Base salary is intended to provide a certain level of income
commensurate with an executive’s position, responsibilities, and contributions
to the Company. The Committee believes the combined value of base salary
plus
annual cash incentive is competitive with the salary and bonus provided to
similarly situated executives for companies in our industry. In allocating
compensation among these components, the Committee believes that the
compensation of our senior levels of management, the levels of management
having
the greatest ability to influence our performance, should be predominately
performance based, while lower levels of management should receive a greater
portion of their compensation as base salary.
The
three
main components in our executive compensation program are:
|
•
|
Base
Salary
|
|
•
|
Incentive
Bonus
|
|
•
|
Stock
Incentives
|
Base
Salary
Base
salaries for our named executive officers are based on job responsibilities
and
individual contribution with reference to base salary levels of executives
at
comparable publicly held companies and our general compensation practices.
Our
base salary levels reflect a combination of factors, including competitive
pay
levels, the executive’s experience and tenure, our overall annual budget for
both merit increases and pre-tax profit, the executive’s individual performance,
and changes in responsibility. We review salary levels annually to recognize
these factors. We do not target base salary at any particular percent of
total
compensation.
Annual
Incentive Bonuses
Our
named
executive officers are eligible to participate in the Management Incentive
Compensation Plan (the “MIC Plan”). Under the MIC Plan, the Committee approves
an annual incentive cash bonus calculation for our named executive officers
taking into account certain financial performance targets and the individual’s
strategic task accomplishments. Such bonuses, if any, are intended to reflect
the Committee’s belief that a portion of the annual compensation of each
executive officer should be contingent upon the performance of the Company,
as
well as the individual contribution of each officer. The amount of such bonus
will be based upon our achievement of revenue and net income targets as well
as
each officer’s achievement of key non-financial performance objectives, in each
case established each year by the Committee and our Board of
Directors.
For
2006,
the Committee and our Board of Directors set the target bonus levels equal
to
100% of base salary for our Chairman and Chief Executive Officer and 75%
of base
salary for the named executive officers other than our CEO. For each of the
named executive officers, including the CEO, the bonus calculations were
as
follows: (a) 60% of each executive officer’s target bonus would be awarded if we
achieved our net income goal; (b) 20% of the target bonus would be awarded
if we
achieved our revenue goal; and (c) 20% of the target bonus would be awarded
if
the named executive officer achieved his key non-financial performance
objectives.
Net
Income Component
The
named
executive officers can earn a portion of their target bonus if our net income
is
within 10% of our annual target goal. For illustration purposes only, if
our net
income target was $1,000,000 and our audited financials for that year showed
a
net income of $990,000 (or 99% of our target), the named executive officers
would receive 90% of their 60% target bonus attributable to net income. The
percentage would decrease by 10% for each percentage point under the target
goal. Using the same example, if our audited financials showed net income
of
$900,000 (or 90% of our goal), the named executive officers would not receive
any portion of their annual bonus attributable to net income.
Our
executive officers can earn more than their target bonus if our net income
is
greater than the target goal. Using the example in the previous paragraph,
if
our audited financials for that year showed a net income of $1,010,000 (or
101%
of our target), the named executive officers would receive 104% of their
60%
target bonus that is applicable to net income. The percentage would increase
by
4% for each percentage point above the target goal. The maximum amount that
can
be earned by each named executive officer is 200% of their 60% target bonus
component for net income.
We
did
not achieve our net income goal in 2006. Therefore, our named executive officers
received 0% of their 60% target bonus attributable to net income.
Revenue
Component
Similar
to the net income component, the named executive officers can earn a portion
of
their target bonus if our revenues were within 5% of our annual target goal.
For
illustration purposes only, if our revenue target was $100,000,000 and our
audited financials for that year showed revenue of $99,000,000 (or 99% of
our
target), the named executive officers would receive 80% of their 20% target
bonus attributable to revenue. The percentage would decrease by 20% for each
percentage point under the target goal. Using the same example, if our audited
financials showed revenue of $95,000,000 (or 95% of the Company’s target), the
named executive officers would not receive any portion of their annual bonus
attributable to revenue.
Our
executive officers can earn more than their target bonus if our revenue was
greater than the target goal. Using the example in the previous paragraph,
if
the audited financials for that year showed revenue of $101,000,000 (or 101%
of
our annual target), the named executive officers would receive 104% of their
20%
target bonus that is applicable to revenue. The percentage would increase
by 4%
for each percentage point over the target goal. The maximum amount that can
be
earned by each named executive officer is 200% of their 20% target bonus
component for revenue.
We
did
not achieve our revenue goal in 2006. Therefore, our named executive officers
received 0% of their 20% target bonus that was applicable to
revenue.
Key
Non-Financial Performance Objectives Component
Each
of
our named executive officers can earn 20% of their target bonus for the
achievement of their key non-financial performance objectives. As discussed
earlier, the Committee and our Board of Directors establish key non-financial
performance objectives for each of our named executive officers. Our named
executive officers achieved between 66% and 100% of their non-financial
performance objectives for 2006.
Discretionary
Awards
Our
management has the discretion, subject to the approval of our Chairman and
Chief
Executive Officer, the Committee and the Board of Directors, to make adjustments
(up to 20%) above or below the amount calculated under the target formula,
in
cases where circumstances not under the control of our named executive officers
have affected (positively or negatively) their ability to meet performance
targets. The Committee and the Board of Directors approved discretionary
award
bonuses for 2006 to Messrs. Ribeiro, Brown and Shaw. These discretionary
awards
ranged from 3.8% to 6.9% of their annual target bonus opportunity. Mr. Carney
cannot award himself a discretionary award.
The
Committee and the Board of Directors, at their discretion, may also award
additional bonuses above the amount calculated under the target formula,
irrespective of whether or not the named executive officers achieved their
target bonus opportunity. The Committee and the Board of Directors did not
exercise this discretion in 2006.
Pursuant
to our Employment Agreement with Shaun McAlmont, dated September 26, 2006,
the
annual incentive bonus payable to Mr. McAlmont for 2006 could not be less
than
$150,000, irrespective of whether or not we achieved our revenue and net
income
target. The amended and restated employment agreements for Mr. McAlmont and
for
each of our other named executive officers, dated February 1, 2007, do not
contain a minimum incentive bonus provision.
For
2006,
the named executive officers received an annual incentive bonus between 20%
to
26.7% of their respective target bonus opportunities, with the exception
of Mr.
McAlmont, who received an annual incentive bonus equal to 72.7% of his target
bonus opportunity.
For
additional information about the Annual Incentive Bonuses, please refer to
the
“Grants of Plan-Based Awards” table, which shows the target and maximum bonus
amounts payable under the plan for 2006, and the Summary Compensation Table,
which shows the actual amount of bonuses paid under the plan to our named
executive officers for 2006.
Stock
Incentives
Stock
option grants provide for potential financial gain derived from the potential
appreciation in stock price from the date that the option is granted until
the
date that the option is exercised. The exercise price of stock option grants
is
set at fair market value on grant date. Under the shareholder-approved 2005
Long-Term Incentive Stock Plan, the Company may not grant stock options at
a
discount to fair market value or reduce the exercise price of outstanding
stock
options except in the case of a stock split or other similar event. The
Company’s long-term performance ultimately determines the value of stock
options, because gains from stock option exercises are entirely dependent
on the
long-term appreciation of the Company’s stock price. Stock options granted in
2006 vest ratably in equal installments on the first, second and third
anniversaries of the grant date and expire ten years from the grant date.
The
Committee believes that stock incentives provide an incentive that focuses
the
executive’s attention on the Company from the perspective of an owner with an
equity stake in the business. Stock options are generally granted with an
exercise price equal to the fair market value of the Common Stock on the
date of
grant, which provides value to the recipient only when the price of the
Company’s stock increases above the exercise price (that is, only to the extent
that shareholders as a whole have benefited). Generally, stock options granted
to executive officers vest ratably over a three-year period based on the
option
holder’s continuous service with the Company. This vesting feature encourages
retention and provides long-term incentive.
Because
a
financial gain from stock options is only possible after the price of our
common
stock has increased, we believe stock grants encourage executives and other
employees to focus on behaviors and initiatives that should lead to an increase
in the price of our common stock, which benefits all of our shareholders.
In
2006,
the Committee made grants of stock options to two of our named executive
officers under the Company’s 2005 Long-Term Incentive Plan. The details of these
grants are provided in the Summary Compensation Table below.
No
Backdating or Spring Loading:
Lincoln
does not backdate options or grant options retroactively. In addition, we
do not
plan to coordinate grants of options so that they are made before announcement
of favorable information or after announcement of unfavorable information.
Lincoln’s options are granted at fair market value on the date the option grants
are approved by our Compensation Committee. Fair market value has been
consistently determined as the closing price on the Nasdaq Global Market
on the
grant date. All grants require the approval of the Compensation Committee.
The
Company’s general practice is to grant options only on the dates of each
Committee meeting, although there are occasions when grants have been made
on
other dates. The Company is working to eliminate “off cycle” grants to the
extent possible.
Retirement
Plans
The
Company maintains a plan qualified under Section 401(k) of the Internal Revenue
Code. Under our 401(k) plan, a participant may contribute a maximum of 25%
of
his or her pre-tax salary, commissions and bonuses through payroll deductions,
up to the statutorily prescribed annual limit ($15,000 in calendar year 2006).
The percentage elected by more highly compensated participants may be required
to be lower. In addition, at the discretion of our board of directors, we
may
make discretionary matching and/or profit-sharing contributions into our
401(k)
plan for eligible employees, which may be subject to vesting
requirements.
With
respect to each of the named executive officers, the following matching
contributions were made on their behalf under our 401(k) plan for 2006: $4,342
for Mr. Carney; $4,342 for Mr. Brown; $2,842 for Mr. Shaw; $2,842 for Mr.
Ribeiro; and $2,385 for Mr. McAlmont.
We
believe that a 401(k) plan induces our employees to save for future retirement
needs and we encourage this by matching 30% of our employee’s annual
contributions, up to 6% of total compensation.
The
Company also maintains a pension plan for certain employees, which is a defined
benefit pension plan, intended to qualify under Section 401(a) and Section
501(a) of the Code. This plan was frozen at December 31, 1994 for non-union
employees. Benefits under this plan are funded through employer contributions.
Our employees are eligible to participate in the pension plan when they have
satisfied the years of service and age requirements. The pension plan provides
a
benefit upon normal retirement (which is age 65) equal to: 1.5% of ‘average
monthly earnings’ (as defined in the pension plan) multiplied by the number of
the participant’s years of service up to a maximum of 35 years plus any past
service accrued benefit. Average monthly earnings are generally the
participants’ average of monthly earnings, which includes items includible as
compensation as described in the applicable Code regulations. The plan permits
early retirement at age 55, provided that the participant has been credited
with
at least 15 years of service.
Participants
generally become 100% vested in their benefits under the pension plan when
they
complete five years of service unless the plan is deemed to be a ‘top
heavy plan’ (as defined in the pension plan).
Benefits
under the pension plan are normally payable in the form of a single-life
annuity
in the case of unmarried participants, and in the form of a joint and survivor
annuity in the case of married participants.
With
respect to each of the named executive officers, only Mr. Brown is eligible
to
participate in the pension plan. Mr. Brown has 27 credited full years of
service
under the pension plan as of the date of this proxy statement.
Perquisites
and Other Personal Benefits
We
provide each of the named executive officers with use of a vehicle for business
and personal use and pay for associated costs, including automobile insurance,
parking and fuel, as part of their employment agreements described below.
The
value of this benefit is disclosed in the Summary Compensation
Table.
Our
named
executive officers are also eligible to participate in (as are all our employees
who meet service requirements under the several plans) our medical and dental
health insurance plans, our life insurance plan (benefit equal to $100,000)
and
long-term disability insurance plan.
The
medical and dental plans require a contributory amount to be paid by all
participants. While no participant contribution is required for the life
insurance plan, we do include the cost of those benefits that exceed $50,000
in
participants’ reported income to the Internal Revenue Service. We provide a
long-term disability insurance plan under which we pay the insurance premiums.
In some cases, our named executive officers and other participants have
requested, and been permitted, to pay the premiums themselves, so that any
benefits paid upon disability would not be taxable to the participant.
We
believe that the several insurance plans we offer are important components
of
our comprehensive benefit package, which induces employees to remain with
us.
Mr.
McAlmont has been reimbursed certain expenses associated with his relocation
in
2006 from Colorado to New Jersey in accordance with the Company’s Relocation
Policy. To date, approximately $18,000 has been reimbursed under that policy.
In
addition, the Company agreed to purchase Mr. McAlmont’s home in Colorado. The
$520,000 price paid for Mr. McAlmont’s home equaled the average of the amount of
two independent appraisers selected by us.
Non-Qualified
Deferred Compensation
None
of
our named executive officers participate in a non-qualified deferred
compensation program.
Employment-Related
Arrangements
The
employment agreements for each of our named executive officers were amended
and
restated on February 1, 2007. The descriptions of the employment agreements
below reflect these amendments.
Employment
Agreement with David F. Carney
Employment
Period.
The
agreement provides that Mr. Carney will serve as our Chairman and Chief
Executive Officer for a term ending on December 31, 2008.
Compensation
and Benefits.
We have
agreed that we will compensate Mr. Carney with a minimum annual base salary
of
$385,000. Mr. Carney will also be eligible to earn an annual bonus for each
calendar year during the term of his employment, pursuant to the terms of
our
MIC Plan in effect for such calendar year. For a description of the MIC Plan,
please see page 10.
Mr.
Carney will also be included, to the extent eligible, in all of our employee
benefit plans, programs and arrangements (including, without limitation,
any
plans, programs or arrangements providing for retirement benefits, profit
sharing, disability benefits, health and life insurance or vacation and paid
holidays) that are established for, or made available to, our senior executives.
In addition, we will furnish Mr. Carney with coverage by our customary director
and officer indemnification arrangements, subject to applicable
law.
Involuntary
Termination.
In the
event that during Mr. Carney’s employment term, there is an “Involuntary
Termination” (as defined below) of Mr. Carney’s employment, we will pay him: (1)
two times the amount of his base salary, as is then in effect; (2) two times
the
average of his annual bonus; (3) all outstanding reasonable travel and other
business expenses incurred as of the date of his termination; and (4) the
employer portion of the premiums necessary to continue his health care coverage
for the earlier of (A) one year and (B) the date on which he is covered under
another group health plan. Mr. Carney will also be entitled to (1) the continued
use of an automobile and payment of associated costs by us for the greater
of
(A) one year and (B) the remainder of his employment term and (2) receive
any
other accrued compensation and benefits otherwise payable to him as of the
date
of his termination. All the aforementioned payments would be paid by us in
a
lump-sum amount no later than 30 days after the date of his termination.
This
lump sum payment may be deferred for six months, if necessary, to comply
with
the American Jobs Creation Act of 2004. For purposes of Mr. Carney’s employment
agreement, “Involuntary Termination” means the termination of his employment (1)
by us (or any successor thereto) without “Cause” (as defined in his employment
agreement) or (2) by Mr. Carney for “Good Reason” (as defined in his employment
agreement).
Termination
for Cause, Death or Disability; Resignation Other than for Good
Reason.
In the
event that during Mr. Carney’s employment term, Mr. Carney’s employment is
terminated by us for Cause, or Mr. Carney resigns from his employment other
than
for Good Reason, we will pay him (or his estate, if applicable) his accrued
but
unpaid base salary earned through the date of termination, unreimbursed
expenses, plus any other accrued but unpaid employee benefits earned through
the
date of his termination, including, without limitation, any annual bonus
due but
not yet paid for a completed calendar year.
Change
in Control.
Upon a
Change in Control (as defined in his employment agreement), we (or our
successor) will continue the employment of Mr. Carney, and Mr. Carney will
continue performing services for us for a period of two years commencing
on the
date of the Change in Control and ending on the second anniversary thereof.
Upon
a Change in Control, all outstanding stock options granted by us or any of
our
affiliates to Mr. Carney will become fully vested and immediately exercisable
on
the date of the Change in Control.
During
a
30-day period commencing on the first anniversary of the date of the Change
in
Control, Mr. Carney will have the right to resign from his employment with
us
(or our successor) for any reason and receive an amount equal to (i) one
times
the amount of his base salary, as is then in effect, and (ii) one times the
average of his annual bonus paid to him for the two years immediately prior
to
the year in which such resignation occurs. If, however, such resignation
constitutes an Involuntary Termination (as defined above), he will receive
payments in accordance with an Involuntary Termination. All of the
aforementioned payments would be paid by us in a lump-sum amount no later
than
30 days after the date of his termination.
Reduction
in Payments.
The
employment agreement contains an Internal Revenue Code, as amended (the “Code”)
Section 280G “cusp” provision. In the event that any payment or distribution by
us to or for the benefit of Mr. Carney pursuant to the terms of the employment
agreement or otherwise would be considered a “parachute payment” and the amount
of the parachute payment, after deduction of all relevant taxes, including
excise taxes imposed by Code Section 4999, is less than the amount Mr. Carney
would receive if he was paid three times his average “base amount” less $1.00,
then the aggregate amounts constituting the parachute payment will be reduced
(or returned by Mr. Carney if already paid to him) to an amount that will
equal
three times his average “base amount” less $1.00.
Noncompetition.
Mr.
Carney is subject to a noncompetition restrictive covenant during the term
of
his employment and for one year thereafter, although the covenant will not
apply
if his employment is terminated due to an Involuntary Termination or he resigns
during the 30-day period commencing on the first anniversary of a Change
in
Control.
Nonsolicitation.
Mr.
Carney is subject to a nonsolicitation restrictive covenant of clients,
employees and key consultants during the term of this employment and for
one
year thereafter.
Confidentiality.
Mr.
Carney is subject to a confidentiality restrictive covenant of unlimited
duration.
Arbitration.
Any
dispute or controversy arising under or in connection with Mr. Carney’s
employment agreement that cannot be mutually resolved by him and us will
be
settled exclusively by arbitration in West Orange, New Jersey. The cost of
the
arbitration will be borne by the parties in the manner determined by the
arbitrators.
Waiver
and Release.
Our
obligations under Mr. Carney’s employment agreement are subject to Mr. Carney
executing and delivering a waiver and release (relating to his release of
claims
against us) in a form reasonably and mutually agreed upon.
Employment
Agreements with Named Executive Officers other than Mr. Carney
The
terms
of the Company’s employment agreements for Messrs. Brown, McAlmont, Shaw and
Ribeiro are identical to those set forth in Mr. Carney’s employment agreement
described above, except that (a) Mr. Brown will serve as Vice Chairman and
will receive a minimum annual base salary of $340,000; (b) Mr. McAlmont will
serve as President and Chief Operating Officer and will receive a minimum
annual
base salary of $300,000; (c) Mr. Shaw will serve as Executive Vice
President and will receive a minimum annual base salary of $290,000; (d)
Mr. Ribeiro will serve as Senior Vice President, Chief Financial Officer
and Treasurer, and will receive a minimum annual base salary of $275,000;
and
(d) in the event of an Involuntary Termination of either of Messrs. Brown’s,
McAlmont’s, Shaw’s or Ribeiro’s employment term, each shall only be entitled to
receive a payment of one and one half times his base salary and annual
bonus.
Transactions
With Related Persons
The
Company recognizes that related person transactions present a heightened
risk of
conflicts of interest. As a general matter, it is the preference of the Company
to avoid related person transactions. The term “related person transaction”
refers to a transaction required to be disclosed pursuant to Item 404 of
Regulation S-K, under the Securities Act of 1933, as amended.
Nevertheless,
the Company recognizes that there are situations where related person
transactions may be in, or may not be inconsistent with, the best interests
of
the Company and its shareholders. As a result, pursuant to the Company’s Audit
Committee (the “Committee”) written charter, the Committee is charged with the
responsibility to review and approve all related person transactions on an
ongoing basis. All such transactions must be approved in advance by the Audit
Committee.
In
addition, the Company’s Code of Business Ethics and Conduct (the “Code of
Conduct”) contains policies and procedures with respect to conflicts of interest
and related person transactions. The Code of Conduct requires that all
directors, officers, employees and certain other persons subject to the Code
of
Conduct, adhere to it and prohibits certain arrangements that may be relevant
to
related person transactions including, but not limited to, prohibitions against:
obtaining a substantial interest in any entity which does or seeks to do
business with, or is a competitor of, the Company; entering into various
arrangements (including family or other relationships) which might dissuade
such
director, officer, employee or other person from acting in the best interest
of
the Company; entering into a financial transaction or relationship with a
student, prospect, vendor, agent or competitor of the Company; benefiting,
or
seeking to benefit, (directly or indirectly) from such person’s position with
the Company from any sale, purchase or other activity of the Company; using
Company property or information for personal gain; obtaining loans or guarantees
for personal obligation from the Company; and competing with the
Company.
Compensation
Committee Report
The
Compensation Committee has reviewed and discussed with the Company’s management
the Compensation Discussion and Analysis included in this proxy statement.
Based
on that review and discussion, the Compensation Committee has recommended
to the
Board of Directors that the Compensation Discussion and Analysis be included
in
this proxy statement.
The
foregoing report on executive compensation in 2006 is provided by the
undersigned members of the Compensation Committee of the Board of
Directors.
|
Date:
March
20, 2007
|
|
|
COMPENSATION
COMMITTEE
|
|
|
James
J. Burke, Jr. (Chairman)
|
|
|
Paul
E. Glaske
|
|
|
Steven
W. Hart
|
|
|
Alexis
P. Michas
|
Executive
Compensation
|
Summary
Compensation Table
|
||||||||||||||||||||||
|
for
Fiscal Year End December 31, 2006
|
||||||||||||||||||||||
|
Name
and Principal Position
|
Year
|
Salary
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation
($)
|
Change
in Pension Value and Nonqualified Deferred Compensation
Earnings
($)
|
All
Other Compensation
($)
|
Total
($)
|
|||||||||||||||
|
(1)
|
(2)
|
(3)
|
(4)
|
|||||||||||||||||||
|
David
F. Carney
|
2006
|
|
375,000
|
|
59,783
|
|
75,000
|
-
|
|
7,679
|
|
517,462
|
||||||||||
|
Chairman
of the Board of Directors and Chief Executive Officer
|
||||||||||||||||||||||
|
Shaun
McAlmont
|
2006
|
247,516
|
125,874
|
150,000
|
-
|
4,412
|
527,802
|
|||||||||||||||
|
President
and Chief Operating Officer
|
||||||||||||||||||||||
|
Cesar
Ribeiro
|
2006
|
250,000
|
159,767
|
50,000
|
-
|
8,122
|
467,889
|
|||||||||||||||
|
Senior
Vice President and Chief Financial Officer
|
||||||||||||||||||||||
|
Lawrence
E. Brown
|
2006
|
330,000
|
56,673
|
50,000
|
|
1,318
|
8,206
|
446,197
|
||||||||||||||
|
Vice
Chairman
|
||||||||||||||||||||||
|
Scott
M. Shaw
|
2006
|
280,000
|
51,702
|
50,000
|
-
|
7,800
|
389,502
|
|||||||||||||||
|
Executive
Vice President
|
||||||||||||||||||||||
__________
(1)
Represents
the proportionate amount of the total fair value of option awards recognized
by
the Company as an expense in 2006 for financial accounting purposes. The
fair
values of these awards and the amounts expensed in 2006 were determined in
accordance with Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 123 (revised 2004) Share-Based Payment (FAS 123R).
The
awards for which expense is shown in this table include the awards described
in
the Grants of Plan-Based Awards table beginning on page 22 of this Proxy
Statement, as well as awards granted in 2002 through 2006 for which we continued
to recognize expense in 2006. The assumptions used in determining the grant
date
fair values of these awards are set forth in the notes to the Company’s
consolidated financial statements, which are included in our Annual Report
on
Form 10-K for the year ended December 31, 2006 filed with the SEC.
(2)
Reflects
the value of cash incentive bonuses earned under our Annual Incentive
Plan.
(3)
Reflects
the increase during 2006 in actuarial present values of Mr. Brown’s accumulated
benefits under our Pension Plan.
(4)
Amounts
reflected in this column include 401(k) matching contributions for each named
executive officer as well as the portion of personal use of a company-owned
vehicle by the named executive officers during 2006.
|
Grants
of Plan-Based Awards
|
||||||||||||||||||||||
|
for
Fiscal Year End December 31, 2006
|
||||||||||||||||||||||
|
Estimated
Future Payouts
Under
Non-Equity
Incentive
Plan Awards
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
|
Excercise
or
Base
Price
of
Option
|
Grant
Date
Fair
Value
of
Stock
and
Option
|
|||||||||||||||||||
|
Threshold
|
Target
|
Maximum
|
Options
|
Awards
|
Awards
|
|||||||||||||||||
|
Name
|
Grant
Date
|
($)
|
($)
|
($)
|
(#)
|
($/Sh)
|
($)
|
|||||||||||||||
|
(1)
|
(1)
|
(2)
|
(3)
|
|||||||||||||||||||
|
David
F. Carney
|
2006
|
-
|
|
375,000
|
|
562,500
|
-
|
-
|
-
|
|||||||||||||
|
Shaun
McAlmont
|
2006
|
-
|
206,250
|
309,375
|
-
|
-
|
-
|
|||||||||||||||
|
7/20/2006
|
-
|
-
|
-
|
60,000
|
|
17.92
|
|
91,448
|
||||||||||||||
|
Cesar
Ribeiro
|
2006
|
-
|
187,500
|
281,250
|
-
|
-
|
-
|
|||||||||||||||
|
7/20/2006
|
-
|
-
|
-
|
25,000
|
17.92
|
38,103
|
||||||||||||||||
|
Lawrence
E. Brown
|
2006
|
-
|
247,500
|
371,250
|
-
|
-
|
-
|
|||||||||||||||
|
Scott
M. Shaw
|
2006
|
-
|
210,000
|
315,000
|
-
|
-
|
-
|
|||||||||||||||
__________
(1)
Represents
target and maximum payout levels under the Annual Incentive Plan for 2006
performance. The actual amount of incentive bonus earned by each named executive
officer in 2006 is reported under the Non-Equity Incentive Plan Compensation
column in the Summary Compensation Table. Additional information regarding
the
design of the Annual Incentive Plan is included in the Compensation Discussion
and Analysis beginning on page 9.
(2)
Options
were awarded under the Company’s 2005 Long-Term Incentive Plan and vest ratably
on the first, second and third year anniversary of the grant date.
(3)
Represents
the grant
date fair value of the award determined in accordance with FAS 123R.
Grant
date fair value of options is based on the Black-Scholes option pricing model
for use in valuing executive stock options. The actual value, if any, that
a
named executive officer may realize upon exercise of options will depend
on the
excess of the stock price over the base value on the date of exercise, so
there
is no assurance that the value realized by a named executive officer will
be at
or near the value estimated by the Black-Scholes model. The assumptions used
in
determining the grant date fair values of these awards are set forth in the
notes to the Company’s consolidated financial statements, which are included in
our Annual Report on Form 10-K for the year ended December 31, 2006 filed
with
the SEC.
|
Oustanding
Equity Awards
|
|||||||||||||
|
at
Fiscal Year End December 31, 2006
|
|||||||||||||
|
Option
Awards
|
|||||||||||||
|
Name
|
Number
of securities underlying unexercised options
(#)
Exercisable
|
Number
of securities underlying unexercised options
(#)
Unexercisable
|
Option
exercise
price
($)
|
Option
expiration
date
|
|||||||||
|
David
F. Carney
|
279,987
|
-
|
|
3.10
|
1/1/2012
|
||||||||
|
38,668
|
21,332
|
14.00
|
11/3/2013
|
||||||||||
|
Shaun
McAlmont
|
3,000
|
12,000
|
20.00
|
6/23/2015
|
|||||||||
|
-
|
60,000
|
17.92
|
7/20/2016
|
||||||||||
|
Cesar
Ribeiro
|
16,000
|
24,000
|
25.00
|
6/7/2014
|
|||||||||
|
5,000
|
10,000
|
14.19
|
12/9/2015
|
||||||||||
|
-
|
25,000
|
17.92
|
7/20/2016
|
||||||||||
|
Lawrence
E. Brown (1)
|
231,291
|
-
|
3.10
|
1/1/2012
|
|||||||||
|
34,780
|
20,220
|
14.00
|
11/3/2013
|
||||||||||
|
Scott
M. Shaw
|
235,500
|
-
|
3.10
|
1/1/2012
|
|||||||||
|
31,556
|
18,444
|
14.00
|
11/3/2013
|
||||||||||
__________
(1)
10,000
of
the reported exercisable options are held by Laurie Brown, to whom Lawrence
E.
Brown is married. The remaining options (exercisable and unexercisable) are
held
by Mr. Brown.
|
Option
Exercises and Stock Vested
|
|||||||
|
as
of Fiscal Year End December 31, 2006
|
|||||||
|
Option
Awards
|
|||||||
|
Name
|
Number
of Shares Acquired on Exercise
(#)
|
Value
Realized on Exercise
($)
|
|||||
|
(1)
|
|||||||
|
David
F. Carney
|
100,000
|
|
1,380,000
|
||||
|
Shaun
McAlmont
|
-
|
-
|
|||||
|
Cesar
Ribeiro
|
-
|
-
|
|||||
|
Lawrence
E. Brown
|
16,000
|
219,840
|
|||||
|
Scott
M. Shaw
|
-
|
-
|
|||||
__________
(1)
Value
realized represents the excess of the fair market value of the shares at
the
time of exercise over the exercise price of the options.
|
Pension
Benefits
|
|||||||||||||
|
as
of Fiscal Year End December 31, 2006
|
|||||||||||||
|
Name
|
Plan
name
|
Number
of years credited service
(#)
|
Present
Value of accumulated benefit
($)
|
Payments
during last fiscal year
($)
|
|||||||||
|
David
F. Carney (1)
|
|||||||||||||
|
Shaun
McAlmont (1)
|
|||||||||||||
|
Cesar
Ribeiro (1)
|
|||||||||||||
|
Lawrence
E. Brown
|
Pension
Plan for Employees of Lincoln Technical Institute, Inc.
|
27
|
|
252,855
|
-
|
||||||||
|
Scott
M. Shaw (1)
|
|||||||||||||
__________
|
(1)
|
The
named executive officers are not eligible to participate under
the Pension
Plan for Employees of Lincoln Technical Institute,
Inc.
|
Termination
Payments and Benefits.
As
discussed above under “Employment-Related Arrangements”, upon a Change in
Control (as defined in our named executive officers employment agreements),
we
(or our successor) will continue the employment of our named executive officers,
and they will continue performing services for us for a period of two years
commencing on the date of the Change in Control and ending on the second
anniversary thereof. Upon a Change in Control, all outstanding stock options
granted by us or any of our affiliates to our named executive officers will
become fully vested and immediately exercisable on the date of the Change
in
Control.
The
following table summarizes the value of the termination payments and benefits
that our named executive officers would receive if a Change in Control occurred
on December 31, 2006 and each of our named executive officers had been
Involuntarily Terminated (as defined in their respective employment agreements)
on December 31, 2006. This table excludes vested account balances under our
401(k) plan that is generally available to all of our employees.
|
Executive
|
Aggregate
Severance
Pay
($)
|
Present
Value
of
Pension
($)
|
Stock
Options
(Black-Scholes
Value)
($)
|
Welfare
Benefits
Continuation
($)
|
Parachute
Tax
Gross-up
Payment
($)
|
Total
($)
|
|||||||||||||
|
(1)
|
|||||||||||||||||||
|
David
F. Carney
|
|
959,019
|
-
|
|
61,741
|
|
20,354
|
-
|
|
1,041,115
|
|||||||||
|
Shaun
McAlmont
|
596,250
|
-
|
528,901
|
18,969
|
-
|
1,144,119
|
|||||||||||||
|
Cesar
Ribeiro
|
478,505
|
-
|
356,601
|
22,359
|
-
|
857,465
|
|||||||||||||
|
Lawrence
E. Brown
|
585,126
|
|
252,855
|
58,443
|
21,323
|
-
|
917,747
|
||||||||||||
|
Scott
M. Shaw
|
504,425
|
-
|
53,233
|
16,756
|
-
|
574,414
|
|||||||||||||
__________
(1)
Includes
the employer portion of the premiums necessary to continue health care coverage
and the value of the continued use of an automobile and payment of associated
costs by us for one year from the date of termination.
During
a
30-day period commencing on the first anniversary of the date of the Change
in
Control, each of our named executive officers will have the right to resign
from
their employment with us (or our successor) for any reason and receive an
amount
equal to (i) one times the amount of their base salary, as is then in effect,
and (ii) one times the average of their annual bonus paid to him for the
two
years immediately prior to the year in which such resignation occurs. If,
however, such resignation constitutes an Involuntary Termination (as defined
above), our named executive officers will receive payments in accordance
with an
Involuntary Termination.
Director
Compensation
As
described more fully below, this chart summarizes the annual cash compensation
for the Company’s non-employee directors during 2006:
|
Director
Compensation
|
||||||||||
|
for
Fiscal Year End December 31, 2006
|
||||||||||
|
Name
|
Fees
Earned or Paid in Cash
($)
|
Stock
Awards
($)
|
Total
($)
|
|||||||
|
(1)
|
||||||||||
|
Alexis
P. Michas
|
|
34,000
|
|
26,083
|
|
60,083
|
||||
|
Celia
Currin
|
29,250
|
22,782
|
52,032
|
|||||||
|
James
J. Burke
|
31,500
|
26,083
|
57,583
|
|||||||
|
J.
Barry Morrow
|
25,250
|
22,782
|
48,032
|
|||||||
|
Jerry
G. Rubenstein
|
35,000
|
26,083
|
61,083
|
|||||||
|
Paul
E. Glaske
|
31,000
|
26,083
|
57,083
|
|||||||
|
Peter
S. Burgess
|
47,000
|
26,083
|
73,083
|
|||||||
|
Steven
W. Hart
|
31,000
|
26,083
|
57,083
|
|||||||
__________
(1)
Represents
the compensation costs for financial reporting purposes for the year under
FAS
123R.
We
also
reimburse directors for out-of-pocket expenses attendant to Board
membership.
Compensation
of Directors
The
Company currently pays each of its non-employee directors annual compensation
of
$25,000 for services to the Company. In addition, each non-employee director
receives $1,000 per board meeting attended in person or by telephone. The
chairman of each committee of the board receives an additional $500 per board
meeting attended. Non-employee directors on committees of the board will
each
receive an additional payment of $1,000 for each committee meeting attended
on a
day other than the day of a board meeting for which that director has been
compensated. The audit committee chairman will receive an additional $10,000
annual retainer.
Non-employee
directors are also eligible to receive awards of restricted stock under the
2005
Non-Employee Directors Restricted Stock Plan (the Restricted Stock Plan)
as
compensation for their services as directors.
Initial
Grant of Restricted Stock.
Pursuant to the Restricted Stock Plan, each non-employee director receives
an
initial award of shares of restricted stock equal to $60,000 (based on the
Fair
Market Value of a share of Common Stock on the Date of Grant) for service
as a
director of the Company on the first day of the calendar month following
the
month in which such non-employee director becomes a non-employee director.
On
March 1, 2006, 3,625 shares of common stock were awarded to Directors Morrow
and
Currin. The per share fair market value of the Common Stock on March 1, 2006
was
$16.55.
Annual
Grants of Restricted Stock.
The Restricted Stock Plan also provides that, as of the date of each annual
meeting, each non-employee director shall automatically receive an award
of
shares of restricted stock equal to $30,000 (based on the Fair Market Value
of a
share of Common Stock on the Date of Grant) for service as a director of
the
Company, provided that such non-employee director shall continue to serve
as a
director of the Company immediately after such annual meeting. On May 23,
2006,
1,781 shares of common stock were awarded to each of our eight non-employee
directors. The per share fair market value of the common stock on May 23,
2006
was $16.84.
All
awards of common stock under the Restricted Stock Plan vest ratably on the
first, second and third anniversary of the grant date; however, there is
no
vesting period on the right to vote or the right to receive dividends on
these
shares. As of December 31, 2006, there were a total of 39,912 shares awarded
under the Restricted Stock Plan of which 6,138 shares are vested.
Beginning
in 2007, each non-employee director shall automatically receive an award
of
shares of restricted stock equal to $40,000 (based on the Fair Market Value
of a
share of Common Stock on the Date of Grant) for service as a director of
the
Company, provided that such non-employee director shall continue to serve
as a
director of the Company immediately after such annual meeting.
Mr.
Carney does not receive any fees or stock awards for his service as a
director.
Audit
Committee Report
The
Audit
Committee
assists
the board of directors in fulfilling its oversight responsibilities with
respect
to the Company’s financial reporting process, by monitoring, among other
matters, the quality and integrity of the Company’s financial statements, the
independence and performance of Deloitte & Touche LLP (“D&T”), the
Company’s independent registered public accounting firm, and the performance of
the Company’s internal auditors. Management has primary responsibility for
preparing the financial statements and for the reporting processes, including
the design and maintenance of the Company’s system of internal controls. The
independent registered public accounting firm is responsible for auditing
the
Company’s consolidated financial statements and opining upon management’s
internal control assessment and upon the effectiveness of those controls
in
accordance with the standards of the Public Company Accounting Oversight
Board
(PCAOB). The Audit Committee is solely responsible for the compensation,
appointment and oversight of the Company’s independent
registered
public accounting firm.
In
this
context, the Audit Committee has met and held discussions with management,
the
independent registered public accounting firm and the internal auditors,
separately and together, with and without management present, regarding the
Company’s audited financial statements as of December 31, 2006, and for the year
then ended and regarding the Company’s internal controls. Management represented
to the Audit Committee that the Company’s consolidated financial statements were
prepared in accordance with generally accepted accounting principles in the
U.S.
The Audit Committee also discussed with the independent registered public
accounting firm the matters required to be discussed by PCAOB
Interim
Auditing
Standard
AU Section 380
(Communications
with Audit Committees).
Further, the Audit Committee discussed with the internal auditors the Company’s
plans for and scope of internal audits, identification of audit risks and
results of audit activities.
The
Audit
Committee reviewed and discussed with the independent registered public
accounting firm the auditor’s independence from the Company and its management.
As part of that review, the Company’s independent registered public accounting
firm submitted to the Audit Committee the written disclosures and the letter
required by Independence Standards Board Standard No. 1,
as
amended
(Independence
Discussions with Audit Committees)
in
which D&T affirmed its independence from the Company. Further, the Audit
Committee discussed with D&T the firm’s independence and considered whether
D&T’s provision of non-audit services to the Company was compatible with
maintaining D&T’s independence. The
Audit
Committee concluded that D&T is independent from the Company and its
management.
Based
upon the considerations described above and subject to the limitations upon
the
role and responsibilities of the Audit Committee as set forth in the Committee’s
Charter, the Audit Committee recommended to the board of directors that the
audited financial statements for the year ended December 31, 2006 be included
in
the Company’s 2006 Annual Report on Form 10-K.
|
Date:
March 20, 2007
|
|
|
AUDIT
COMMITTEE
|
|
|
|
Peter
S. Burgess, Chairman
|
|
|
Jerry
G. Rubenstein
|
|
|
Celia
Currin
|
PROPOSAL
NUMBER TWO—RATIFICATION OF APPOINTMENT
OF
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
The
Audit
Committee has appointed Deloitte & Touche LLP, which has served as the
Company’s independent registered public accounting firm since 1999, to be the
Company’s independent registered public accounting firm for the year ending
December 31, 2007. Deloitte & Touche LLP has advised the Company that
it does not have any direct or indirect financial interest in the Company.
Representatives of Deloitte & Touche LLP are expected to attend the annual
meeting and will be given the opportunity to make a statement if they choose
to
do so. They will also be available to respond to appropriate
questions.
Before
appointing Deloitte & Touche LLP, the Audit Committee carefully considered
Deloitte & Touche LLP’s qualifications, including the firm’s performance as
independent registered public accounting firm for the Company in prior years
and
its reputation for integrity and competence in the fields of accounting and
auditing. The Audit Committee also considered whether Deloitte & Touche
LLP’s provision of non-audit services to the Company is compatible with that
firm’s independence from the Company.
Shareholders
will be asked at the annual meeting to ratify the appointment of Deloitte
&
Touche LLP. If the shareholders ratify the appointment, the Audit Committee
may
still, in its discretion, appoint a different independent registered public
accounting firm at any time during the year 2007 if it concludes that such
a
change would be in the best interests of the Company. If the shareholders
fail
to ratify the appointment, the Audit Committee will reconsider, but not
necessarily rescind, the appointment of Deloitte & Touche LLP.
Fees
Billed by Independent Registered Public Accounting
Firm
As
more
fully described below, all services to be provided by Deloitte & Touche LLP
are pre-approved by the Audit Committee, including audit services, tax services
and certain other services.
The
SEC
requires disclosure of fees billed by the Company’s independent registered
public accounting firm for certain services. The following table sets forth
the
aggregate fees paid to Deloitte & Touche LLP during the years ended December
31, 2006 and 2005:
|
Fee
Category
|
2006
|
2005
|
|||||
|
Audit
Fees
|
$
|
552,200
|
$
|
462,139
|
|||
|
Tax
Fees
|
85,800
|
78,796
|
|||||
|
All
Other Fees
|
234,487
|
256,539
|
|||||
|
Total
Fees
|
$
|
872,487
|
$
|
797,474
|
|||
Audit
Fees consisted
principally of audit services of our consolidated financial statements, review
of our quarterly financial statements, services that are normally provided
by
the independent auditors in connection with statutory and regulatory filings
and
the audit of management’s report on the effectiveness of our internal control
over financial reporting, as required by Section 404 of the Sarbanes-Oxley
Act
of 2002.
Tax
Fees consisted
principally of professional services rendered by Deloitte & Touche LLP in
connection with the Company’s tax compliance activities, including technical and
tax advice related to the preparation of tax returns.
All
Other Fees consisted
primarily of professional services rendered in connection of the Company’s
initial public offering filing, the Company’s 401(k) and pension plan audits as
well as consultation regarding our acquisition of New England Institute of
Technology at Palm Beach, Inc.
Audit
Committee Pre-Approval Policy
The
Audit
Committee approves, prior to engagement, all audit and non-audit services
provided by Deloitte & Touche LLP and all fees to be paid for such services.
All services are considered and approved on an individual basis. In its
pre-approval and review of non-audit service fees, the Audit Committee
considers, among other factors, the possible effect of the performance of
such
services on the auditors’ independence.
Required
Vote
A
majority of the votes cast at the annual meeting will be required to ratify
the
appointment of Deloitte & Touche LLP as the Company’s independent registered
public accounting firm for 2007.
The
board of directors recommends a vote FOR
Proposal Number Two.
ANNUAL
REPORT AND FINANCIAL STATEMENTS AND
COMMITTEE
AND CORPORATE GOVERNANCE MATERIALS OF THE COMPANY
Copies
of the Company’s Annual Report filed with the SEC on Form 10-K for the year
ended December 31, 2006, including the Company’s consolidated financial
statements and financial statement schedule, will be mailed to interested
shareholders, without charge, upon written request. Exhibits to the
Form 10-K will be provided upon written request and payment to the Company
of the cost of preparing and distributing those materials. The current charters
of the Board’s Audit, Compensation, Nominating & Corporate Governance
Committees, along with the Company’s Code of Business Ethics and Conduct and
Integrity Assurance Program, are available to interested shareholders upon
request and are posted on our website at www.lincolneducationalservices.com.
Written requests should be sent to Lincoln Educational Services Corporation,
200
Executive Drive, Suite 340, West Orange, New Jersey 07052, Attention:
Investor Relations.
CORPORATE
GOVERNANCE GUIDELINES AND CODE OF
ETHICS
The
board
of directors’ corporate governance guidelines, which include guidelines for
determining director independence, director responsibilities, director access
to
management and independent advisors, and director stock ownership guidelines,
are posted on our website at www.lincolneducationalservices.com.
The
board of directors has determined that the following five directors satisfy
the
Nasdaq Global Market’s independence requirements: Messrs. Rubenstein,
Glaske, Burgess, Morrow and Ms. Currin.
The
Company has adopted an Integrity
Assurance Program - A Code of Business Ethics and Conduct that
applies to all directors, officers and employees and that is intended, among
other things, to comply with Section 406 of the Sarbanes-Oxley Act of 2002
and related Securities and Exchange Commission and Nasdaq Global Market
rules requiring a code of ethics for a company’s directors, officers and
employees. A copy of the Integrity Assurance Program - A Code of Business
Ethics
and Conduct is posted on our website at www.lincolneducationalservices.com.
The
Audit Committee must approve any requests for amendments to or waivers from
the
Integrity Assurance Program with respect to directors and executive officers
and
the Company intends to report such amendments or waivers that are required
to be
reported pursuant to the rules of the Securities and Exchange Commission
and the Nasdaq Global Market on the Company’s website.
SHAREHOLDER
PROPOSALS FOR THE 2008 ANNUAL
MEETING
OF SHAREHOLDERS
Shareholder
proposals that are intended to be presented at the 2008 Annual Meeting of
Shareholders pursuant to Rule 14a-8 under the Securities Exchange Act of
1934, as amended, must be received by the Secretary of the Company, in writing,
no later than November 27, 2007 in order to be considered for inclusion in
the
Company’s proxy materials for that annual meeting. Shareholder proposals and
shareholder nominations for election to the board of directors must also
comply
with the current advance notice and other requirements set forth in the
Company’s current Bylaws to be eligible to be presented at an annual meeting.
These requirements include, in part, the requirement that any such proposal
or
nomination must, with certain exceptions if the date of the annual meeting
is
advanced or delayed more than 30 days from that of the first anniversary of
this year’s annual meeting, be submitted to the Secretary of the Company at
least 120 and not more than 150 days prior to the first anniversary of the
date of mailing of the notice for this year’s annual meeting (or between October
28, 2007 and November 27, 2007 based on this year’s notice mailing date of March
26, 2007).
COMMUNICATING
WITH THE BOARD
OF DIRECTORS
You
may
contact any non-employee Director, or the entire Board, at any time. Your
communication should be sent to the Lincoln Educational Services Corporation
Board of Directors - Non-Employee Directors, c/o Corporate Secretary, Lincoln
Educational Services Corporation, 200 Executive Drive, Suite 340, West Orange,
New Jersey 07052.
Communications
are distributed to the Board, or any Board member as appropriate, depending
on
the facts and circumstances outlined in the communication. Certain items
that
are unrelated to the duties and responsibilities of the Board will be excluded,
such as spam and other junk mail, resumes and other job inquiries, surveys
and
business solicitations or advertisements.
Material
that is unduly hostile, threatening, illegal or similarly unsuitable will
also
be excluded. We will make available to any non-employee Director any
communication that is filtered in accordance with the process described above,
at that Director’s request.
HOUSEHOLDING
OF ANNUAL MEETING MATERIALS
Some
banks, brokers and other nominee record holders may participate in the practice
of “householding” proxy statements and annual reports. This means that unless
stockholders give contrary instructions, only one copy of our proxy statement
or
annual report may be sent to multiple stockholders in each household. We
will
promptly deliver a separate copy of either document to you if you call or
write
to us at the following address or telephone number: Lincoln Educational Services
Corporation, c/o Corporate Secretary, 200 Executive Drive, Suite 340, West
Orange, New Jersey 07052, telephone (973) 736-9340. If you want to receive
separate copies of our proxy statement or annual report in the future, or
if you
are receiving multiple copies and would like to receive only one copy per
household, you should contact your bank, broker or other record holder, or
you
may contact us at the above address or telephone number.
OTHER
INFORMATION
Proxy
authorizations submitted via the Internet must be received by 5:00 p.m.
(Eastern Daylight Time) on April 25, 2007. To give your proxy authorization
via
the Internet, please read the instructions on the enclosed proxy card. Costs
associated with electronic access, such as from access providers, will be
borne
by the shareholder.
|
|
By
Order of the Board of Directors
|
|
|
|
|
|
Kenneth
M. Swisstack
|
|
|
Corporate
Secretary
|
|
West
Orange, New Jersey
|
|
|
March
23, 2007
|
|
ANNUAL
MEETING OF SHAREHOLDERS OF
LINCOLN
EDUCATIONAL SERVICES CORPORATION
April
26, 2007
Please
date, sign and mail your proxy card in the
envelope
provided as soon as possible.
v
FOLD
AND DETACH HERE AND READ THE REVERSE SIDE v
PLEASE
SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE ý
1.
Election of Directors:
|
o David
F. Carney
|
o Alexis
P. Michas
|
|
o James
J. Burke, Jr.
|
o Steven
W. Hart
|
|
o Jerry
G. Rubenstein
|
o Paul
E. Glaske
|
|
o Peter
S. Burgess
|
o J.
Barry Morrow
|
|
o Celia
Currin
|
|
FOR
ALL NOMINEES
|
WITHHOLD
AUTHORITY
|
FOR
ALL EXCEPT
(See
instructions below)
|
|
o
|
o
|
o
|
|
INSTRUCTION:
|
To
withhold authority to vote for any individual nominee(s), mark
“FOR
ALL EXCEPT” and
fill in the circle next to each nominee you wish to withhold, as
shown
here: ý
|
To
change
the address on your account, please check the box at right and indicate your
new
address in the address space to the left. Please note that changes to the
registered name(s) on the account may not be submitted via this method.
o
2.
Ratification
of the appointment of Deloitte & Touche LLP to serve as the Company’s
independent registered public accounting firm for the fiscal year ending
December 31, 2007.
|
FOR
|
|
AGAINST
|
|
ABSTAIN
|
|
o
|
|
o
|
|
o
|
3.
To
transact such other business as may properly come before the Annual Meeting
or
any adjournment(s) or postponement(s) thereof and as to which the undersigned
hereby confers discretionary authority to the proxies.
CHECK
HERE IF YOU PLAN TO ATTEND THE MEETING o
|
Signature
of Shareholder
|
|
Date:
|
|
Signature
of Shareholder
|
|
Date:
|
|
|
Note:
|
Please
sign exactly as your name appears hereon. When shares are held
by joint
owners, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give title as such.
If a
corporation, please sign in full corporate name by President or
other
authorized officer. If a partnership, please sign in partnership
name by
authorized person.
|
LINCOLN
EDUCATIONAL SERVICES CORPORATION
Proxy
For Annual Meeting of Shareholders
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned shareholder of Lincoln Educational Services Corporation, a New
Jersey corporation (the “Company”), hereby appoints David F. Carney and Cesar
Ribeiro, and each of them, as proxies for the undersigned, with full power
of
substitution in each of them, to attend the Annual Meeting of Shareholders
of
the Company to be held on Thursday, April 26, 2007, at 10:00 a.m., local
time,
at the Wilshire Grand Hotel, 350 Pleasant Valley Way, West Orange, New Jersey
07052, and any adjournment(s) or postponement(s) thereof, to cast on behalf
of
the undersigned all votes that the undersigned is entitled to cast at such
meeting and otherwise to represent the undersigned at the meeting, with the
same
effect as if the undersigned were present. The undersigned hereby acknowledges
receipt of the Notice of Annual Meeting of Shareholders and the accompanying
Proxy Statement and revokes any proxy previously given with respect to such
shares.
THE
VOTES ENTITLED TO BE CAST BY THE UNDERSIGNED WILL BE CAST IN ACCORDANCE WITH
THE
SPECIFICATIONS MADE BY THE UNDERSIGNED. IF THIS PROXY IS EXECUTED, BUT NO
SPECIFICATION IS MADE BY THE UNDERSIGNED, THE VOTES ENTITLED TO BE CAST BY
THE
UNDERSIGNED WILL BE CAST “FOR” ALL NOMINEES AND THE FOREGOING PROPOSALS AND
OTHERWISE IN THE DISCRETION OF THE PROXIES AT THE ANNUAL MEETING OR ANY
ADJOURNMENT(S) OR POSTPONEMENT(S) THEREOF.