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 (Amendment No.
)
Filed by the Registrant
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Preliminary
Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
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Definitive
Proxy Statement
☐
Definitive
Additional Materials
☐
Soliciting
Material Pursuant to §240.14a-12
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National American University Holdings, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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computed on table below per Exchange Act Rules 14a-6(i)(1) and
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the filing fee is calculated and state how it was
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Date
Filed:
5301 Mt. Rushmore Road
Rapid City, South Dakota 57701
September 21, 2018
Dear Stockholder:
You
are cordially invited to attend the 2018 Annual Meeting of
Stockholders of National American University Holdings, Inc.,
to be held at the Holiday Inn-Rushmore Plaza, 505 North Fifth
Street, Rapid City, South Dakota 57701, commencing at
9:00 a.m. Mountain Time on Tuesday, October 9,
2018.
The
accompanying Notice of Annual Meeting and the proxy statement that
follow describe the matters to be considered and voted upon at the
Annual Meeting. At the Annual Meeting, I will also report on the
progress of our business during the past year, and you will have an
opportunity to ask questions.
I
hope that you will be able to attend the Annual Meeting. It is
important that your shares be represented at the Annual Meeting.
Whether or not you plan to attend the meeting, we urge you to vote
your shares via the toll-free number provided or over the Internet,
as described in the enclosed materials. You may also mark,
sign and date the enclosed proxy card and return it in the envelope
provided.
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Sincerely,
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Ronald L. Shape
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President and Chief Executive Officer
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5301 Mt. Rushmore Road
Rapid City, South Dakota 57701
NOTICE OF 2018 ANNUAL MEETING OF STOCKHOLDERS
TABLE OF CONTENTS
PAGE
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GENERAL INFORMATION
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1
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QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
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1
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QUESTIONS
AND ANSWERS ABOUT PROXY SOLICITATION
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4
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ADDITIONAL
INFORMATION
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5
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CORPORATE GOVERNANCE
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5
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Director
Independence
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5
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Board’s
Role in Risk Oversight
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5
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Board
Leadership Structure
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6
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Certain
Relationships and Related Transactions
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6
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Board
Committees and Their Functions
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6
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Audit
Committee
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6
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Compensation
Committee
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7
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Board
Meetings and Attendance
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7
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Director
Nomination Process
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7
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Communications
with the Board of Directors
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8
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PROPOSAL NUMBER 1—ELECTION OF DIRECTORS
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9
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General
Information
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9
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Board
Voting Recommendation
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9
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Nominees
and Directors
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9
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EXECUTIVE OFFICERS
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12
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EXECUTIVE AND DIRECTOR COMPENSATION
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13
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Summary
Compensation Table
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15
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Discussion
of Executive Compensation Decisions
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16
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Outstanding
Equity Awards at Fiscal Year-End
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19
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Employment
Agreements
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20
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Director
Compensation and Benefits
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21
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Beneficial
Ownership of Principal Stockholders, Directors and
Management
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22
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Section 16(a) Beneficial
Ownership Reporting Compliance
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25
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Audit
Committee Report
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25
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PROPOSAL NUMBER 2—STOCKHOLDER ADVISORY VOTE TO APPROVE
EXECUTIVE COMPENSATION
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26
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Board
Voting Recommendation
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26
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PROPOSAL NUMBER 3—ADOPTION OF 2018 Stock Option and
Compensation Plan
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26
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PROPOSAL NUMBER 4—RATIFICATION OF APPOINTMENT OF OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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33
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Independent
Registered Public Accounting Firm Fees and Services
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Audit
Committee Pre-Approval Policies and Procedures
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34
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Board
Voting Recommendation
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34
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OTHER BUSINESS
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35
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DELIVERY OF PROXY MATERIALS TO HOUSEHOLDS
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35
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STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
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APPENDIX A – NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC. 2018
STOCK OPTION AND COMPENSATION PLAN
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NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC.
5301 Mt. Rushmore Road
Rapid City, South Dakota 57701
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS—OCTOBER 9, 2018
GENERAL INFORMATION
This
proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the “Board”) of
National American University Holdings, Inc. (the
“Company,” “NAUH,” “we,”
“us,” or “our”) to be voted at our 2018
Annual Meeting of Stockholders (the “Annual Meeting”)
to be held on Tuesday, October 9, 2018, at 9:00 a.m. Mountain
Time, at the Holiday Inn-Rushmore Plaza, 505 North Fifth Street,
Rapid City, South Dakota 57701, or at any postponement or
adjournment of the Annual Meeting. We are first making the
proxy statement and form of proxy card available to our
stockholders on or about September 21, 2018.
What is the purpose of the Annual Meeting?
At
the Annual Meeting, our stockholders will vote on the following
items of business:
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Elect
the nine nominees named in the proxy statement to the Board, each
of whom will hold office until the next annual meeting of
stockholders and until his or her successor is elected and
qualified or until his or her earlier resignation or
removal;
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Approve
by an advisory vote the compensation of our named executive
officers;
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Adopt the
Company’s 2018 Stock Option and Compensation Plan
;
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Ratify
the appointment of Deloitte & Touche LLP as our independent
registered public accounting firm for the fiscal year ending
May 31, 2019; and
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Conduct
such other business as may properly come before the Annual Meeting.
Presently, management is not aware of any other business to come
before the Annual Meeting.
In
addition, management will report on the performance of our business
and respond to questions from stockholders.
Who is entitled to vote at the Annual Meeting?
In
order to vote at the Annual Meeting, you must be a stockholder of
record of the Company as of August 14, 2018, the record date for
the Annual Meeting. You have one vote for each share of our common
stock you own, and you can vote those shares for each item of
business to be addressed at the Annual Meeting. If your shares are
held in “street name” (that is, through a brokerage
firm, bank or other nominee), you will receive instructions from
the stockholder of record that you must follow in order for your
shares to be voted as you choose.
How many shares must be present to hold a valid Annual
Meeting?
For
us to hold a valid Annual Meeting, we must have a quorum, which
means that a majority of the outstanding shares of our common stock
that are entitled to vote are present at the Annual Meeting. As of
the record date, there were 24,348,425 shares of our common stock
outstanding and entitled to vote. There are no other classes of
capital stock outstanding. Your shares will be counted as present
at the Annual Meeting if you:
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Vote
via the Internet or by telephone;
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Properly
submit a proxy card (even if you do not provide voting
instructions); or
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Attend
the Annual Meeting and vote in person.
How many votes are required to approve an item of
business?
Assuming
a quorum is present at the Annual Meeting:
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The
election to the Board of each nominee for director requires the
affirmative vote of a plurality of the shares of common stock
present in person or by proxy and entitled to vote at the Annual
Meeting.
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The
approval, in a non-binding advisory vote, of the compensation paid
to our named executive officers as set forth in this Proxy
Statement requires the affirmative vote of a majority of the shares
of common stock present in person or by proxy and entitled to vote
on the proposal at the Annual Meeting. Although the advisory vote
on compensation paid to our named executive officers is
non-binding, our Board will review the result of the vote and will
consider it in making a determination concerning executive
compensation in the future.
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The adoption of the
Company’s 2018 Stock Option and Compensation Plan requires
the affirmative vote of a majority of the shares of common stock
present in person or by proxy and entitled to vote on the proposal
at the Annual Meeting
.
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The
ratification of the appointment of Deloitte & Touche LLP as our
independent registered public accounting firm for the fiscal
year ending May 31, 2019 requires the affirmative vote of a
majority of the shares of common stock present in person or by
proxy and entitled to vote on the proposal at the Annual
Meeting.
How do I vote my shares if they are held in nominee “street
name,” such as by a brokerage firm, bank or other
nominee?
If
on the record date you hold shares of our common stock in an
account with a brokerage firm, bank, or other nominee, then you are
a beneficial owner of the shares and hold such shares in
“street name.” As a beneficial owner, you have the
right to direct your broker, bank, or other nominee on how to vote
your shares. The nominee that holds your shares is considered the
stockholder of record for purposes of voting at the Annual Meeting.
Because you are not the stockholder of record, you may not vote
your shares in person at the Annual Meeting unless you bring a
proxy from your broker, bank or other nominee to the Annual
Meeting.
Whether
or not you plan to attend the Annual Meeting, we urge you to vote
by following the voting instructions provided to you by your
nominee to ensure that your vote is counted. If you do not provide
voting instructions to your nominee, your nominee will not be
permitted to vote your shares in its discretion on all of the items
of business, except for the ratification of the appointment of
Deloitte & Touche LLP as our independent registered
public accounting firm for the current fiscal year. In the past, if
you held your shares in “street name” and you did not
indicate how you wanted your shares voted in the election of
directors, your bank or broker was allowed to vote those shares on
your behalf on the election of directors as they thought
appropriate. Recent changes in regulation took away the ability of
your bank or broker to vote your uninstructed shares in the
election of directors on a discretionary basis. Therefore, it is
particularly important for street name holders to instruct their
brokers or banks as to how they wish to vote their
shares.
How will abstentions and broker non-votes affect the quorum and
voting?
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If
you withhold your vote on the election of directors or abstain from
voting on the other proposals, you will still be considered present
at the Annual Meeting for purposes of determining a
quorum.
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If
you withhold your vote from the election of a director nominee,
this will reduce the number of votes cast for that
nominee.
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If
you abstain from voting on a proposal, other than on the election
of directors, you will be deemed to have voted against that
proposal.
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If
you do not vote your shares that are held in nominee “street
name,” such as by a brokerage firm, and your nominee does not
have discretionary power to vote your shares on a particular
matter, the failure of the nominee to vote the shares on that
matter is called a “broker non-vote.” Broker non-votes
will be considered present at the Annual Meeting for purposes of
determining a quorum. Broker non-votes, however, will not be
counted in determining the number of shares voted for or against
the matter.
How does the Board recommend that I vote?
The
Board recommends that you vote:
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FOR
the election of each of the nine director nominees named in this
proxy statement;
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FOR
the approval by an advisory vote of the compensation of our named
executive officers;
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FOR
the adoption of the Company’s 2018 Stock Option and
Compensation Plan; and
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FOR
the ratification of the appointment of Deloitte & Touche LLP as
our independent registered public accounting firm for the
fiscal year ending May 31, 2019.
How do I vote?
If
you are a stockholder of record (that is, if your shares are owned
directly in your name and not in “street name” through
a broker), you may vote in any of the following ways:
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By
attending the Annual Meeting and voting in person;
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By
voting by proxy over the Internet or calling toll-free (within the
U.S. or Canada) by following the instructions provided in the proxy
materials; or
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By
marking, dating, signing and returning the proxy card.
Even
if you plan to attend the Annual Meeting, we recommend that you
also submit your proxy so that your vote will be counted if you
later decide not to attend the meeting.
If
you wish to vote by Internet or telephone, you must do so before
11:59 p.m. Eastern Time (9:59 p.m. Mountain Time) on
October 8, 2018. After that time, Internet and telephone voting
will not be permitted, and a stockholder wishing to vote, or revoke
an earlier proxy, must submit a signed proxy card or vote in
person.
“Street
name” stockholders who wish to vote at the Annual Meeting
will need to obtain a proxy form from the institution that holds
their shares of record.
How are my voting instructions carried out?
If
you vote by telephone or through the Internet, and the Company
receives it in the time provided above, the persons named as
proxies will vote your shares in the manner that you specify. Proxy
cards that are properly executed, duly returned and not revoked
will be voted in the manner specified. If a proxy card is properly
executed but does not specify any or all choices for each proposal,
the proxy will be voted as follows:
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FOR
the election of the nine nominees for director as described in this
proxy statement;
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FOR
the approval by an advisory vote of the compensation of our named
executive officers;
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FOR
the adoption of the Company’s 2018 Stock Option and
Compensation Plan;
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FOR
the ratification of the appointment of Deloitte & Touche LLP as
our independent registered public accounting firm for the
fiscal year ending May 31, 2019; and
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In
the discretion of the persons named in the proxy, as to such other
matters as may be properly come before the Annual
Meeting.
What if I change my mind after I vote via proxy?
You
may revoke your proxy at any time before your shares are voted at
the Annual Meeting. If you are a stockholder of record, you can
change your vote by:
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Submitting
a later-dated proxy until 11:59 p.m. Eastern Time
(9:59 p.m. Mountain Time) on October
8, 2018;
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Voting
in person at the Annual Meeting; or
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Providing
written notice revoking your proxy vote to our Corporate Secretary
at our principal office prior to the Annual Meeting.
If
on the record date you held shares of our common stock in an
account with a brokerage firm, bank, or other nominee, then you
must instruct the nominee that holds your shares of your desire to
change or revoke your voting instructions.
QUESTIONS AND ANSWERS ABOUT PROXY SOLICITATION
How are proxies solicited?
We
will request that brokerage firms, banks, other custodians,
nominees, fiduciaries and other representatives of stockholders
forward proxy materials and annual reports to the beneficial owners
of our common stock. We may solicit proxies by mail, in person, by
telephone, through electronic transmission and by facsimile
transmission. Our directors, officers and employees will not
receive additional compensation for soliciting stockholder
proxies.
Who will pay for the cost of soliciting proxies?
We
will pay all of the costs of preparing, printing and distributing
proxy materials. We will reimburse brokerage firms, banks and other
representatives of stockholders for reasonable expenses incurred by
them in sending proxy materials and annual reports to the
beneficial owners of our common stock.
ADDITIONAL INFORMATION
Where can I find additional information about National American
University Holdings, Inc.?
Our reports on Forms 10-K, 10-Q and 8-K, and other
publicly available information should be consulted for other
important information about us. You can also find additional
information about us on our website at
www.national.edu
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CORPORATE GOVERNANCE
Our
Board is elected by our stockholders to oversee our business and
affairs. The Board monitors and evaluates our business performance
through regular communication with our chief executive officer and
by holding Board meetings and Board committee
meetings.
The Board values effective corporate governance
and adherence to high legal and ethical standards. We have adopted
the Code of Business Conduct and Ethics (the “Code of
Conduct”), which is applicable to our employees, officers and
members of our Board.
This Code of Conduct is intended to
deter wrongdoing and to promote honest and ethical conduct, full,
fair, accurate, timely and understandable disclosure in reports and
documents that we file with, or submit to, the Securities and
Exchange Commission (the “SEC”), compliance with
applicable laws, rules and regulations, prompt internal reporting
of
violations
of the Code of
Conduct, accountability for any violation of the Code of Conduct,
and a culture of compliance and ethics.
Our Code of Conduct is posted on our website
at
www.national.edu
under the “Investor
Relations” link. A paper copy is available to stockholders
free of charge upon request to our Corporate
Secretary.
Director Independence
We
adhere to the director independence requirements under The NASDAQ
Stock Market LLC (“NASDAQ”) corporate governance rules.
For a director to be considered independent under NASDAQ rules, the
Board must affirmatively determine that a director or director
nominee does not have a relationship that, in the opinion of the
Board, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. Under these
director independence standards, the Board has determined that each
of current directors Mr. Berzina, Dr. Crane, Mr. Halbert, Mr. Rowan
and Dr. Saban is independent. The Board based these determinations
primarily on a review of the responses of the directors to
questions regarding employment and compensation history,
affiliations, family and other relationships, and on discussions
with our directors.
Board’s Role in Risk Oversight
Our
Board is responsible for oversight of our risks assessment and
management process. The Board executes this oversight
responsibility directly and through the standing committees of the
Board. The Board and its committees regularly review and discuss
with management our material strategic, operational, financial,
regulatory compliance, and compensation risks.
The
audit committee performs a central oversight role with respect to
financial and compliance risks. The audit committee reviews and
assesses the qualitative aspects of financial reporting, process to
manage financial and financial reporting risk, and compliance with
applicable legal, ethical and regulatory requirements. The audit
committee regularly reports its findings to the Board. The
compensation committee reviews and discusses with management the
impact of our compensation policies and practices on risk taking
within our organization. The Board dissolved the corporate
governance and nominating committee on October 29, 2012 but, prior
to its dissolution, the corporate governance and nominating
committee assisted the Board in overseeing management’s
processes for the assessment and management of non-financial risks
and the steps that management has taken to monitor and control
exposure to such risks. The Board has taken the responsibility of
overseeing these risks since the dissolution of the corporate
governance and nominating committee.
Board Leadership Structure
Our
Board elects its Chairman and appoints the Company’s Chief
Executive Officer according to what it determines is best for the
Company and its stockholders at any given time. The offices of
Chairman and Chief Executive Officer are currently held separately,
which the Board has determined is in the best interests of the
Company and its stockholders at this particular time. However, the
Board does not believe there should be a fixed rule as to whether
the offices of Chairman and Chief Executive Officer should be
vested in the same person or two different people, or whether the
Chairman should be an employee of the Company or should be elected
from among the non-employee directors. The needs of the Company and
the individuals available to fulfill these roles may dictate
different outcomes at different times, and the Board believes that
retaining flexibility in these decisions is in the best interest of
the Company and its stockholders.
Certain Relationships and Related Transactions
Our
Code of Conduct requires our employees to avoid, wherever possible,
all related party transactions that could result in actual or
potential conflicts of interest. The employees also are responsible
to disclose to our compliance officer any actual or perceived
conflict of interest. Related party transactions with respect to
companies like ours are defined under the SEC rules. A conflict of
interest situation can arise when a person takes actions or has
interests that may make it difficult to perform his or her work
objectively and effectively. Conflicts of interest may also arise
if a person, or a member of his or her family, receives improper
personal benefits as a result of his or her position. Related party
transactions are not permitted without the prior consent of our
audit committee, or other independent committee of our Board if it
is inappropriate for our audit committee to review such transaction
due to a conflict of interest. In approving or rejecting the
proposed transaction, our audit committee will consider the facts
and circumstances available and deemed relevant to the committee,
including the risks, costs and benefits to us, the terms of the
transaction, the availability of other sources for comparable
services or products and, if applicable, the impact on a
director’s independence. Our audit committee will approve
only those agreements and arrangements that, in light of known
circumstances, are in, or are not inconsistent with, our best
interests, as our audit committee determines in the good faith
exercise of its discretion. The audit committee and disinterested
directors approved the following related party
transactions.
Mr.
Robert D. Buckingham, co-vice chairman of our Board, has a son,
Michael Buckingham, and a daughter, Deborah Buckingham, who are
employed by the Company, and in the aggregate their compensation
exceeded $120,000 during the fiscal year ended May 31, 2018.
Michael Buckingham’s compensation during that period was
$146,915 and Deborah Buckingham’s compensation during that
period was $77,247.
Our
real estate operations conduct business through various projects
and associations, including Fairway Hills I and II, Park West,
Vista Park, Arrowhead View, Fairway Hills Park and Recreational
Association, the Vista Park Homeowners’ Association and the
Park West Homeowners’ Association. Park West consists of 48
apartment units and is owned by a partnership that is 50% owned by
the Company and 50% owned by members of the Buckingham family
(including Robert Buckingham, co-vice chairman of our board of
directors, and his siblings and the spouses and estates of his
siblings).
Board Committees and Their Functions
Our Board has established a standing audit
committee and a compensation committee.
It is our policy
that all directors should attend the Annual Meeting. All directors
attended last year’s annual meeting of
stockholders.
Audit Committee
The
audit committee is responsible, among its other duties and
responsibilities, for overseeing our accounting and financial
reporting processes, the audits of our financial statements, the
qualifications of our independent registered public accounting firm
and the performance of our internal audit function and independent
registered public accounting firm. The audit committee reviews and
assesses the qualitative aspects of our financial reporting, our
processes to manage business and financial risk and our compliance
with significant applicable legal, ethical and regulatory
requirements. The audit committee is directly responsible for the
appointment, compensation, retention and oversight of our
independent registered public accounting firm. The current members
of our audit committee are Dr. Saban, who serves as chair of the
committee, Dr. Crane and Mr. Berzina. Our Board has determined that
Dr. Saban is an “audit committee financial expert,” as
that term is defined under the SEC rules implementing Section 407
of the Sarbanes-Oxley Act of 2002. Each member of our audit
committee is independent under the NASDAQ rules and pursuant to
Rule 10A-3 of the Securities Exchange Act of 1934, as
amended.
The
audit committee held four regular meetings during the fiscal year
ended May 31, 2018.
The audit committee has adopted a written charter.
The audit committee reviews and assesses the adequacy of its
written charter on an annual basis. A current copy of the audit
committee charter may be found on our website at
www.national.edu
under the “Investor
Relations” link and is available in print to any stockholder
who requests it from our Corporate Secretary.
Compensation Committee
Among its various duties and responsibilities, the
compensation committee is responsible for recommending to the Board
the compensation and benefits of our chief executive officer,
establishing the compensation and benefits of our other executive
officers, monitoring compensation arrangements applicable to our
chief executive officer and other executive officers in light of
their performance, effectiveness and other relevant considerations
and administering our equity incentive plans.
The
compensation committee also recommends to the Board the total
compensation paid to non-management directors.
As part of establishing compensation and benefits
of our executive officers other than our chief executive officer,
our chief executive officer discusses with and recommends to the
compensation committee the compensation of executive officers other
than himself. The compensation committee has the authority to
retain and terminate a consultant or other outside advisor on
compensation matters and reviews and discusses with our Board
corporate succession plans for the chief executive officer and
other key officers. See the “
Executive and Director
Compensation
” section of
this proxy statement for additional information regarding our
processes and procedures for the consideration and determination of
compensation of our named executive officers.
The
current members of our compensation committee are Mr. Halbert, who
serves as chair of the committee, Dr. Crane and Dr. Saban. The
composition of our compensation committee meets the independence
requirements of NASDAQ required for approval of the compensation of
our chief executive officer and other executive
officers.
The
compensation committee held four regular meetings during the fiscal
year ended May 31, 2018.
The compensation committee has adopted a written
charter. The compensation committee has the authority to retain
outside advisors to assist it in the performance of its duties. A
current copy of the compensation committee charter may be found on
our website at
www.national.edu
under the “Investor
Relations” link and is available in print to any stockholder
who requests it from our Corporate Secretary.
Board Meetings and Attendance
The
Board held four regular meetings during the fiscal year ended May
31, 2018. Each incumbent director attended, in person or by
telephone, at least 75% of the meetings of both the Board and Board
committees on which he or she served.
Director Nomination Process
The
Board is responsible for nominating the candidates for election to
the Board and acting with respect to corporate governance policies
and practices, including board size and membership qualifications,
new director orientation, committee structure and membership and
succession planning of our chief executive officer and other key
executive officers. The Board does not have a separate corporate
governance and nominating committee. In accordance with the
requirements of NASDAQ, the director nominees are recommended for
the Board’s selection by or selected by independent directors
constituting a majority of the Board’s independent directors
(the “Independent Directors”) in a vote in which only
independent directors participate.
The
Board regularly assesses the appropriate size of the Board and
whether any vacancies on the Board are expected due to retirement
or otherwise. In the event that vacancies are anticipated, or
otherwise arise, the Board utilizes a variety of methods for
identifying and evaluating director nominees. Candidates may come
to the attention of the Board through current Board members,
professional search firms, stockholders, or other persons. These
candidates are evaluated by the Independent Directors and may be
considered at any point during the year.
All
director nominees selected or recommended by the Independent
Directors and all individuals appointed to fill vacancies created
between our annual meetings of stockholders are required to stand
for election by our stockholders at the next annual meeting. When
there is an opening on the Board, the Independent Directors will
consider candidates who meet the requisite director qualification
standards determined by the Board. When current Board members are
considered for nomination for re-election, their prior
contributions to the Company as directors and meeting attendance
records are taken into account. The Independent Directors will
consider qualified candidates for possible nomination that are
submitted by our stockholders. Stockholders may make such a
submission by sending the following information to the Board, c/o
Corporate Secretary at the address listed below in
“Communications with the Board of
Directors”:
●
the
name and address of the stockholder who intends to make the
nomination;
●
the
name and address of the candidate and a brief biographical sketch
and resume;
●
the
contact information for the candidate and a document evidencing the
candidate’s willingness to serve as a director if elected;
and
●
a
signed statement confirming the submitting stockholder’s
current status as a stockholder and the number of shares currently
held.
The
Independent Directors will evaluate the submission of a proposed
candidate by a stockholder, based on our specific needs at that
time. Based upon a preliminary assessment of the candidate(s),
those who appear best suited to meet our needs may be invited to
participate in a series of interviews, which are used as a further
means of evaluating potential candidates. On the basis of
information learned during this process, the Independent Directors
will determine whether to recommend a candidate for election as a
director at the next annual meeting.
Any
stockholders desiring to present a nomination for consideration by
the Board prior to our 2019 annual meeting must do so no later than
May 23, 2019 in order to provide adequate time to duly consider the
nominee.
Communications with the Board of Directors
Any
stockholder desiring to communicate with our Board, or one or more
of our directors, may send a letter addressed to:
Board
of Directors
National
American University Holdings, Inc.
Attention:
Corporate Secretary
5301
Mt. Rushmore Road
Rapid
City, South Dakota 57701
Our
Corporate Secretary will forward communications received to the
chair of the audit committee or to any individual director or
directors to whom the communication is directed, unless the
communication is unduly hostile, threatening, illegal, does not
reasonably relate to us or our business, or is similarly
inappropriate.
PROPOSAL NUMBER 1—ELECTION OF DIRECTORS
General Information
Our
Bylaws provide that the number of directors shall be fixed from
time to time by the Board, not to exceed nine directors. The Board
has currently fixed the number of directors at nine. The Board has
decided to nominate the nine current directors to next year’s
Board. Our Bylaws also provide that each director shall be elected
each year by the stockholders at the annual meeting of
stockholders, to hold office for a term of one year and until a
successor is elected and qualified.
The
Board has determined that a majority of our current directors
qualify as “independent” directors under NASDAQ rules,
and that each of the nominees Dr. Crane, Dr. Saban, Mr. Halbert,
Mr. Berzina and Mr. Rowan is independent.
You
may vote for all, some or none of the nominees to be elected to the
Board. You may not vote for more individuals than the number
nominated, however. The affirmative vote of a plurality of the
shares of our common stock present in person or by proxy and
entitled to vote at the Annual Meeting is necessary to elect each
director nominee. Each nominee has accepted the nomination and
agreed to serve as a director. We have no reason to expect that any
of the nominees will fail to be a candidate at the Annual Meeting
and, therefore, do not have in mind any substitute or substitutes
for any of the nominees. If any of the nominees should be unable to
serve as a director (which event is not anticipated), proxies will
be voted for a substitute nominee or nominees in accordance with
the best judgment of the person or persons acting under the
proxies. All of the nominees are currently members of the Board and
there are no family relationships among the nominees.
IF YOU RETURN A PROXY CARD THAT IS PROPERLY SIGNED BUT YOU HAVE NOT
MARKED YOUR VOTE, THAT PROXY WILL BE VOTED TO ELECT ALL OF THE
NOMINEES.
Board Voting Recommendation
Management and the Board recommend that
stockholders vote “
FOR
” the election of each of the nine nominees
listed below to constitute our Board.
Nominees and Directors
Robert D.
Buckingham
,
82
,
became
chairman of our Board as of the closing of our transaction with
Dlorah in November 2009 and served in his capacity as chairman
until August 2018. In August 2018, Mr. Buckingham was appointed to
the position of co-vice chairman of our Board. Mr. Buckingham has
served as president of Dlorah since 1986 and as chairman of the
board of directors of Dlorah. Mr. Buckingham has served as chairman
of the board of governors of National American University
(“NAU”) since 1991. He is a member of the board of
directors of the Rapid City Defense Housing Corporation, which owns
and leases the Dakota Ridge housing. From 1960 to 1981 he worked in
various executive and management positions in transportation and
real estate development organizations. Mr. Buckingham has a B.S. in
Business Management from the University of Colorado. Mr. Buckingham
is the father of Michael Buckingham, who is the president of our
real estate operations, and of Deborah Buckingham, who is a
business manager in our real estate operations.
Mr.
Buckingham’s prior substantial experience as president and
chairman of the board of directors of Dlorah enables him to bring
significant experience to the Board relating to industry
experience, depth of knowledge and familiarity with the Company
with unique insights into the Company’s challenges,
opportunities and operations.
Dr. Jerry
L. Gallentine
, 77
,
is the co-vice chairman of our Board. He joined
our Board and was appointed as our president as of the closing of
our transaction with Dlorah on November 23, 2009. Dr. Gallentine
served as our president from 2009 until July 2015, as university
president of NAU from 1993 until July 2015 and as the chief
executive officer of NAU from 1993 until April 2009. Dr. Gallentine
also currently serves on the board of directors of Salem
International University and Schiller International University. Dr.
Gallentine has over 50 years of experience in the education
industry. He served as president of Western New Mexico University
from 1990 to 1993 and was president of Peru State College in
Nebraska from 1982 to 1990. From 1979 to 1982, Dr. Gallentine was
president at Labette Community College in Parsons, Kansas. He was
an assistant professor of biology at Midland Lutheran College in
Fremont, Nebraska, from 1965 through 1968. Dr. Gallentine has
served in many educational and cultural leadership roles, including
past president of the board of directors of the Nebraska
Educational Television Council for Higher Education, past chairman
of the Council of Presidents of the Nebraska State College System,
member of the board of directors of the Nebraska Humanities Council
and founding member of the Nebraska Foundation for the Humanities.
Dr. Gallentine has a B.S. from Fort Hays (Kansas) State University,
and a M.Ed., M.S. and Ph.D. from the University of
Toledo.
Dr.
Gallentine’s experience as university president and chief
executive officer of NAU brings significant expertise, skills and
experience to the Board with respect to leadership, business
operations and industry knowledge.
Dr. Ronald
L. Shape
,
51
, joined our Board in April
2013. Dr. Shape is also our president and chief executive officer.
Dr. Shape served as chief executive officer since the closing of
our transaction with Dlorah on November 23, 2009, and received the
added role of president during fiscal year 2016. Dr. Shape also
served as our chief financial officer from November 2009 until
October 2011. He has been the chief executive officer of NAU since
April 2009, and was the chief operating officer of NAU from 2006
until 2009. Dr. Shape also served as the chief fiscal officer of
NAU from 2002 until the closing of our transaction with Dlorah. In
2001, Dr. Shape was selected as the assistant to the university
president of NAU and served as regional president for the Minnesota
region with NAU in 2000. Dr. Shape worked in a number of different
positions at NAU from 1991 to 2000, including system controller,
assistant director of financial aid and student account specialist.
Since 2013, Dr. Shape has been serving on the board of directors of
the Education Consolidation Corp., an investment vehicle that
consolidates quality post-secondary education institutions
throughout Canada, and of Sodak Development, Inc. Dr. Shape has a
B.A. from Dakota Wesleyan University and an MBA and Ed.D. from the
University of South Dakota.
Dr.
Shape’s particular qualifications for service on our Board
include his substantial experience and understanding of the
Company’s business, and industry knowledge.
Dr. Therese
K. Crane
,
68
,
joined our Board in January 2010. Since August
2003, she has operated Crane Associates, an educational technology
consulting practice, advising educational technology companies in
business strategy, marketing and sales. She currently serves in
various leadership capacities within the education industry,
including as a trustee for the Western Governors University, and as
a board member of Curriki Foundation, a non-profit providing open
source curriculum to teachers and parents worldwide. In 2016, Dr.
Crane joined the board of directors of Alma Technologies and n2y,
both software companies for K-12 schools. From 2012 to April 2014,
Dr. Crane served on the board of Renaissance Learning, an
educational assessment and learning analytics company. From 2003 to
June, 2011, she served as a consultant for e-Luminate Group, an
education consulting firm. From 2006 to 2012, she was a board
member of Tutor.com. Between 2004 and 2011, Dr. Crane served as
Chairman of the Board of Noble Learning Communities, Inc., a
publicly traded school management company. Formerly, Dr. Crane was
a senior executive at Apple and AOL and the President of
Josten’s Learning. Dr. Crane started her career as an
elementary school classroom teacher. Dr. Crane has a B.S. in
elementary education from the University of Texas at Austin, a
M.Ed. in early childhood education and an Ed.D. in administrative
leadership from the University of North Texas.
Dr.
Crane’s prior experience on our Board and her extensive
consulting work in the educational technology industry brings
considerable expertise, leadership and sound guidance to the Board.
Further, Dr. Crane’s experience as a board member of other
public companies adds expertise to our compensation and audit
committees.
Dr. Thomas
D. Saban
,
66
,
joined
our Board as of the closing of our transaction with Dlorah on
November 23, 2009. He currently serves as vice president of finance
and administration at Prairie State College in Chicago Heights,
Illinois. He served as the vice president of administration and
finance and chief financial officer of Rocky Vista University,
College of Osteopathic Medicine from November 2008 to October 2011.
Dr. Saban has over 26 years of experience in the education
industry. He served as the vice president for finance and
administration/chief financial officer at Texas A&M University
from September 2007 to November 2008, associate vice president for
planning, budgets and research at St. Petersburg College in Florida
from October 2002 to September 2007 and as the vice president for
administration and finance/chief financial officer at Worcester
State College in Massachusetts from September 1996 to October 2002.
He also served as the vice president for finance and
administration/chief financial officer of Chadron State College in
Nebraska from July 1990 to September 1996. Dr. Saban held a number
of other educational and leadership roles from 1982 to 1990,
including as controller, director of finance and system
coordinator/project leader. Dr. Saban has a B.S. from the
University of Wyoming, an MBA from the University of Miami and a
Ph.D. from Barry University.
Dr.
Saban is a licensed CPA and his financial expertise in the
education industry provides valuable specialized knowledge and
financial and analytical skill to the Board.
Richard L.
Halbert
,
76
,
joined
our Board in June 2012. Mr. Halbert has served as a member of
NAU’s Board of Governors for the past 16 years and is a
former chair of the National American University Foundation, which
was originally established as the NCB Foundation in 1967 for the
purpose of making loans and providing scholarships, fellowships,
grants, and other financial assistance to or for the benefit of
students and faculty of NAU. From 2001 to 2007, Mr. Halbert also
served as a member of the board of trustees for the Nebraska State
College Board, which oversees the three Nebraska state colleges.
Mr. Halbert possesses over 26 years of operational and business
advisory experience. In 1991, he co-founded Arck Foods, Inc., a ham
processing company, for which he currently serves as secretary and
corporate counsel. Since 1991, he has also served as president and
secretary of Ol’ Farmers Brand, Inc., a subsidiary of Arck
Foods, Inc. that sells hams to Walmart. Since 1982, Mr. Halbert has
served as a member of the board of directors of Southeast Nebraska
Communications, Inc., for whom he is also corporate counsel. As an
attorney at law whose firm Halbert, Dunn & Halbert, L.L.C.
provides estate planning and business counseling, Mr. Halbert
brings over 43 years of extensive legal experience to the Board. He
is a Fellow in The American College of Trust and Estate
Counsel.
Mr.
Halbert’s past contributions to our Company and extensive
experience in higher education, corporate development, and legal
advisory provides valuable knowledge and experience to our
Board.
Jeffrey B.
Berzina
,
46
, served as the Vice
President – Strategic Planning and Corporate Development of
Black Hills Corporation, a diversified energy company publicly
traded on the New York Stock Exchange, from March 2013 through June
2018. Mr. Berzina also held various other positions at Black Hills
Corporation, including Vice President – Corporate Controller
from May 2009 to March 2013, Vice President – Finance from
November 2008 to May 2009, Assistant Corporate Controller from May
2004 to November 2008, and Director of Financial Reporting/Manager
of Financial Reporting from July 2000 to May 2004. In addition, Mr.
Berzina has served on the Financial Advisory Counsel and Investment
Committee of Rapid City Catholic Diocese since August 2013. Mr.
Berzina is a University of South Dakota graduate and has practiced
as a Certified Public Accountant.
Mr.
Berzina’s considerable experience overseeing strategic
planning, mergers and acquisitions, and the accounting/finance
function of a publicly traded company and his extensive knowledge
of the SEC rules and regulations and accounting rules along with
his strong understanding of the design and management of internal
controls over financial reporting brings an in-depth and wide range
of experience, particularly with respect to financial and
regulatory matters, to our Board.
James A.
Rowan
,
69,
joined our Board in
November 2014. Mr. Rowan currently serves as a Partner at Parchman
Vaughan & Company, L.L.C., a private investment banking firm
specializing in education. In 1993, Mr. Rowan joined Legg Mason
Capital Markets, which was subsequently acquired by Stifel,
Nicolaus & Company, Incorporated, and played an integral role
in developing the firm’s significant investment banking role
in the proprietary education and training industries. Prior to
this, Mr. Rowan was a venture capitalist for six years and prior to
that was a senior financial executive at ITT Corporation and City
Investing Company, based in New York and London. A graduate of The
Lawrenceville School, he received a bachelor’s degree in
economics from Cornell University and an MBA in Finance from the
Johnson Graduate School of Management at Cornell. From 2008 to
2017, Mr. Rowan was also a trustee of Waynesburg University. He
remains active in alumni affairs at Lawrenceville and Cornell,
where he is on the Dean’s Leadership Committee for the
Johnson School.
Mr.
Rowan’s extensive experience in finance and investment
banking, particularly as it relates to the education space, adds
valuable knowledge to the Board.
Dr. Edward
Buckingham
,
50,
joined our Board in October
2016 and was elected as chairman of the Board in August 2018. Mr.
Buckingham is a medical doctor, and the founder, director and owner
of the Buckingham Center for Facial Plastic Surgery in Austin,
Texas. Dr. Buckingham started his professional career as an auditor
with Coopers and Lybrand. He founded the Buckingham Center for
Facial Plastic Surgery in July, 2003 after completing his residency
at the University of Texas, and fellowship at New England Laser and
Cosmetic Surgery Center in June, 2003.
Dr. Buckingham is a
current board member for the American Board of Facial Plastic and
Reconstructive surgery, and is a frequent publisher and lecturer on
facial plastic surgery. Dr. Buckingham is the son of Mr. Robert
Buckingham, co-vice chairman of the Company’s Board, and the
grandson of Mr. Harold Buckingham, the founder of NAU. Dr.
Buckingham grew up in Rapid City, South Dakota following the growth
and developments of his family business. Dr. Buckingham earned his
accounting degree from Southern Methodist University, and his
doctor of medicine degree from University of Texas Medical Branch
at Galveston with highest honors.
Dr.
Buckingham’s life-long involvement with NAU, his audit
experience with Coopers and Lybrand, and management of his own
medical practice brings in-depth knowledge and experience with
respect to finance, management and NAU’s business to the
Board.
EXECUTIVE OFFICERS
The
following sets forth information about our non-director executive
officers as of the date of this proxy statement. For information
regarding Dr. Ronald L. Shape, our chief executive officer, see
“PROPOSAL NUMBER 1—ELECTION OF DIRECTORS—Nominees
and Directors.”
|
Name
|
|
Position
|
|
Dr. Ronald L. Shape
|
|
President and Chief Executive Officer
|
|
Dr.
David K. Heflin
|
|
Chief
Financial Officer
|
|
Dr. Lynn Priddy
|
|
Provost and Chief Academic Officer
|
Dr. David
K. Heflin
,
57
, is the Chief Financial
Officer and began his career with the Company in June 2015. From
2008 to 2014, Dr. Heflin was the campus president at Colorado
Technical University’s Sioux Falls, South Dakota campus,
where he was responsible for all campus functions. Before starting
his most recent position in 2008, Dr. Heflin served as vice
president of business and operations at Clayton State University in
Morrow, Georgia from 2005. From 2001 to 2005, Dr. Heflin served as
the chief financial officer and chief operating officer at the
University of Sioux Falls, where he was responsible for various
financial, information technology and enrollment management
matters, among others. Prior to his higher education experience,
Dr. Heflin served BellSouth, ICG Telecommunications, Inc., and
USWest in various leadership positions in accounting and financial
management. Dr. Heflin is a licensed certified public accountant
and a certified management accountant. He holds an Ed.D. in
Leadership from the University of St. Thomas in St. Paul,
Minnesota, a Master of Arts degree in Political Science and a
Bachelors of Professional Accountancy from Mississippi State
University.
Dr. Lynn
Priddy
,
58
, serves as Provost and Chief
Academic Officer of National American University. She joined
National American University in 2013 after serving 14 years with
the Higher Learning Commission of NCA, the largest United States
regional accreditor. Dr. Priddy served as the Vice President for
Accreditation Services during her last seven years with the
Commission. At the Commission, she was responsible for the
accreditation processes, including the decision process, the peer
corps and peer review, education and training, and the Academy for
Assessment of Student Learning, for which she was the founding
director. In her 14-year tenure at the Commission, Dr. Priddy
played a pivotal leadership role in the conceptualization of the
Commission’s new accrediting process, Pathways, the
development of the 1600+ member Peer Review Corps, the
establishment of AQIP, the alternative accrediting process based on
continuous quality improvement principles, and the founding of the
Academy for Persistence and Completion. Dr. Priddy began her higher
education career at Nicolet College. She is a summa cum laude
graduate of the State University of New York at Geneseo with a B.A.
in English, a summa cum laude graduate of the University of
Minnesota-Twin Cities with an M.A. in English; and a summa cum
laude graduate of Capella University with a Ph.D. in Higher
Education, research and evaluation.
EXECUTIVE AND DIRECTOR COMPENSATION
Overview
The compensation committee sets
the
compensation principles that guide the design of our compensation
plans and programs for executive management. The compensation
committee is charged with establishing, implementing and
continually monitoring the executive compensation program, and in
doing so endeavors to achieve and maintain a comprehensive package
that is both fair and competitive, in furtherance of our overall
objectives.
Our
compensation program is designed to attract and retain highly
qualified, ethical personnel and to encourage and reward superior
company performance, with the best interests of our students in
mind. Compensation of our officers and directors is designed to be
consistent with the U.S. Department of Education
regulations.
Compensation Philosophy
Our
executive compensation philosophy is to maintain a compensation
program that is both fair and competitive and which rewards
performance of our senior management. To that end, we seek to set
base salaries of our executive officers at levels that are
comparable with that of executive officers at comparable companies,
who have similar job descriptions, responsibilities and
qualifications, such as experience and education level. We also
compare the base salaries of our executive officers to those
individuals at the Company with similar job titles,
responsibilities, performance expectations, years of service at the
Company, experience and education level. We may also adjust an
executive officer’s base salary from year-to-year based on
his or her achievement of subjective performance factors, such as
providing effective day-to-day leadership and management of the
university’s operations, developing strategic business plans,
motivating and coordinating a high performance management team,
supervising quality control systems of the university’s
academic programs, and overseeing the ethical conduct of university
personnel. Our compensation committee also considers whether such
executive consistently met or exceeded his or her key operational
targets, such as profit margins and net income. In considering
these factors, our compensation committee does not weigh any one
factor over another in setting base salary, but rather takes the
various factors and performance reviews into consideration as a
whole. Through this process, we seek to set base salaries for our
executive officers that are both competitive and fair.
We
also incorporate certain components into our executive compensation
to incentivize our executives to achieve certain financial
performance targets for the Company on a quarterly and annual
basis, such as profit margins and net income. The financial
performance targets contained in such formulas are configured to
reward achievement of financial goals that reflect successful
growth in revenue, increase in profitability, and efficient
management of our costs. In setting these goals, the compensation
committee may offer greater reward for achieving one metric over
another depending on the level of importance it attaches to one
factor over another. For example, the compensation committee may
provide additional reward for achieving profitability and growth
over cost goals, if it determines that such factors are more
central to our strategic plan. Review of such metrics and weighing
of each factors are conducted on an annual basis. Such a
compensation system, we believe, not only encourages hard work, but
also simplifies and makes more transparent our pay
structure.
The
compensation committee believes that our compensation programs are
designed with an appropriate balance of risk and reward in relation
to our overall objectives and do not create risks that are
reasonably likely to have a material adverse effect on the
Company’s business. In this regard, the compensation
committee believes that our mix of short- and long-term
compensation elements encourages our management to produce
consistent, short-term financial results for the Company, but also
encourages our management to increase long-term stockholder value.
In particular, our quarterly and annual achievement awards reward
our executive officers for achieving our short-term financial
goals. Our long-term compensation, on the other hand, has an
equity-based component that is intended to ensure that our
executive officers’ focus on increasing long-term stockholder
value. Through vesting and other performance measure provisions,
our long-term compensation program is also designed to emphasize
the performance measures that our executive officers need to
achieve in order to deliver stockholder value.
Consistent with our
compensation philosophy, the executive compensation program has
been specifically designed to achieve the following
objectives:
●
Meet the demands of the market
. Provide
an attractive combination of salary and quarterly, annual and
long-term compensation at competitive levels among our peers who
provide similar educational services in the markets we serve, to
enable the recruitment and retention of highly qualified
executives. We believe that the supply of qualified executive
talent is limited and have designed our compensation programs to
help us attract and retain qualified candidates by providing
compensation that is competitive within the for-profit education
industry and the broader market for executive talent. Our executive
compensation policies are designed to assist us in attracting and
retaining qualified executives by providing competitive levels of
compensation that are consistent with the executives’
alternatives.
●
Aligning with Stockholders
. Align the
interests of executives with those of our stockholders through
grants of equity-based compensation that also provide opportunities
for ongoing executive ownership. Our compensation program uses
equity-based awards, the value of which is contingent on our
longer-term performance, in order to provide our executive officers
with a direct incentive to seek increased stockholder returns. Our
stockholders receive value when our stock price increases and by
using equity-based awards, our executive officers also receive
increased value when our stock price increases and decreased value
when it decreases. We believe that equity-based awards exemplify
our philosophy of having a straightforward structure by reminding
executive officers that one measure of long-term corporate success
is increased stockholder value over time. Because our equity awards
are granted with time-based vesting, we believe these awards also
aid in the retention of our executive officers.
●
Driving Performance
. Structure
executive compensation around the attainment of both company-wide
and individual targets that further the Company’s long-range
goals with the best interests of our students in mind and
consistent with the U.S. Department of Education regulations. Link
executive pay to attainment of both company-wide and individual
targets to further and reward achievement of Company’s
long-range goals.
Role of Management in Determining Compensation
Dr. Ronald
L. Shape, our president and chief executive officer, on an annual
basis makes recommendations to the compensation committee of our
Board regarding the base salaries of our executive officers, other
than for himself. The compensation committee also consults with
Dr. Shape in identifying key operational targets of the
Company and determining appropriate individual performance metrics
for the executive officers for the following fiscal
year.
Compensation Elements
The
compensation program for our executive officers is comprised
primarily of three elements: base salary, quarterly and annual
incentives, and long-term equity awards. The amount of each
compensation element that is paid in proportion to the total
compensation for each named executive officer depends on overall
market conditions and the financial performance achieved by the
Company.
Base Salary
. Base
salary is an integral part of compensation for our executive
officers. Unless determined pursuant to an employment agreement,
the compensation committee generally recommends, and the Board
approves, base salary levels for our named executive officers after
completion of our annual employee performance review program and
during the time when any salary changes are to take effect. In
general, the compensation committee considers the following
factors: (i) the individual’s performance and contribution to
the long-range goals of the Company’s recent operating
results, and (ii) review of salaries in the market survey data and
for similar positions for comparable companies.
Quarterly and Annual
Incentives
. We have placed an emphasis on performance-based
quarterly and annual achievement awards that are designed to reward
our executive management team based on the achievement of specific
performance measures and goals. We believe quarterly and annual
performance-based pay furthers our compensation philosophy and
objectives by focusing our executive officers on corporate goals,
encouraging continuous quality improvement and providing
straightforward awards. The target for quarterly and annual
achievement awards pay for our executive officers is expressed as a
percentage of base salary.
Long-Term Equity
Awards
. We believe that executive officers should have a
significant potential to benefit from increases in our equity value
in order to align the interests of the executive officers and our
stockholders. The Company provides long-term equity awards under
the National American University Holdings, Inc. 2009 Stock Option
and Compensation Plan, or the “2009 Plan,” the 2013
Restricted Stock Unit Plan, or the “2013 Plan,” and the
proposed 2018 Stock Option and Compensation Plan, or the
“2018 Plan”. The 2009 Plan and the 2018 Plan gives the
compensation committee the latitude of awarding stock options,
non-qualified stock options, restricted stock and other types of
long-term equity awards. The 2013 Plan allows awarding of
restricted stock units and cash awards. Our equity awards may be
split among stock options, restricted stock and restricted stock
units so that the executive officers are incentivized to preserve
as well as grow stockholder value. Our stock options, restricted
stock and restricted stock unit awards generally use one- to
three-year vesting with ten-year terms. The Board has approved the
termination of the 2013 Plan subject to the approval by the
stockholders of the proposal included in this proxy statement to
adopt the 2018 Plan.
Summary Compensation Table
The
following table and accompanying narrative disclosure explains
compensation for the last two fiscal years for the individual who
served as our chief executive officer during fiscal 2018, and for
each of the two other most highly-compensated executive officers,
other than our chief executive officer (collectively, the
“named executive officers”).
|
Name and
Title
|
|
Fiscal
Year
|
Salary
($)
|
Stock
Awards
($)
|
Option
Awards
($)
(1)
|
Non-Equity
Incentive
Plan
Compensation
($)
(6)
|
All
Other
Compensation
($)
|
Total
($)
|
|
Dr. Ronald L.
Shape
|
|
2018
|
354,595
|
216,162
(2)
|
6,431
|
0
|
0
|
577,188
|
|
President and Chief Executive
Officer
|
|
2017
|
315,963
|
151,655
(3)
|
1,545
|
0
|
0
|
469,163
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Lynn Priddy
|
|
2018
|
182,583
|
65,984
(4)
|
900
|
18,500
|
0
|
267,967
|
|
Provost and Chief Academic
Officer
|
|
2017
|
180,596
|
56,175
(5)
|
618
|
18,324
|
0
|
255,713
|
|
|
|
|
|
|
|
|
|
|
|
Dr. Robert Paxton
(7)
|
|
2018
|
190,730
|
65,984
(4)
|
900
|
19,000
|
0
|
276,614
|
|
President of Strategic
Initiatives
|
|
2017
|
183,825
|
56,175
(5)
|
618
|
19,000
|
0
|
259,618
|
_______________________________________
(1)
Amounts represent the aggregate grant date fair
value of stock options as computed in accordance with FASB ASC
Topic 718 utilizing the assumptions discussed in Note 11 to our
Notes to the Annual Consolidated Financial Statements for the
fiscal year ended May 31, 2018.
(2)
Amount represents
$83,352 in stock portion of annual base salary, and the aggregate
grant date fair value of 58,250 restricted stock units which did
not vest.
(3)
Amount
represents $35,692 in stock portion of annual base salary, and the
aggregate grant date fair value of 61,250 restricted stock units
which did not vest and merit award of 3,750 shares of common
stock.
(4)
Amount represents
the aggregate grant date fair value of 28,000 restricted stock
units which did not vest and merit award of 1,250 shares of common
stock.
(5)
Amount represents
the aggregate grant date fair value of 30,000 restricted stock
units which did not vest and merit award of 1,500 shares of common
stock.
(6)
Represents
quarterly merit award payments. See discussion under “Annual
and Quarterly Incentives” below.
(7)
Dr. Paxton retired
from the Company effective as of July 31, 2018.
Discussion of Executive Compensation Decisions
Base Salaries
Our
named executive officers’ compensation was determined, in
part, by arrangements in effect between Dlorah and such named
executive officer. The base salary of Dr. Shape was determined
pursuant to his employment agreement that is described below under
the heading “Employment Agreements.” In setting the
annual base salary of our other senior executive officers, the
compensation committee of our Board considered base salaries of
other officers of similar ranks at the Company and at companies
that provide similar educational services in the markets we serve
and compared responsibilities of the position, performance
expectations, years of service, experience and education level. The
committee also considered individual’s performance and
contribution to the long-range goals of the Company’s recent
operating results. Our compensation committee does not have a
predetermined formula or metric in comparing these factors, but
generally sets a base salary it believes to be competitive but fair
for each of our executive officers, based on the recommendations
made by our chief executive officer. The amount of base salaries
paid to each named executive officer for the fiscal years ended May
31, 2018 and 2017, are reported in the column captioned
“Salary” of the “Summary Compensation
Table” above.
Equity Awards
The
compensation committee believes that it is in the best interest of
our stockholders to have a substantial component of total
compensation “at-risk” and dependent upon our financial
performance.
Fiscal Year 2018
During
fiscal year 2018, Dr. Shape, Dr. Priddy, and Dr. Paxton received
Restricted Stock Units of 58,250, 28,000, and 28,000, respectively
under the 2013 Restricted Stock Unit Plan with the following
performance-based vesting schedule.
|
Audited
Operating Income/Loss EBIT Metric as of May 31,
2018
|
Percentage of Restricted
Stock
Units that will
vest
|
|
Equal to or greater
than $4,900,000
|
100
%
|
|
Equal to or greater
than $3,750,000 and less than $4,900,000
|
67
%
|
|
Equal to or greater
than $3,000,000 and $ less than $3,750,000
|
25
%
|
|
Less than
$3,000,000
|
0
%
|
None of
the restricted stock units vested as audited operating loss as of
May 31, 2018 was less than $3,000,000.
Each of
Dr. Shape, Dr. Priddy, and Dr. Paxton was granted 3,750, 1,250, and
1,250 shares of common stock, respectively, as merit
awards.
Each of
Dr. Shape, Dr. Priddy, and Dr. Paxton was also granted stock
options to purchase 3,750, 1,250, and 1,250 shares of common stock,
respectively. Half of the options were immediately exercisable upon
the grant date of October 20, 2017, and the other half on June 1,
2018.
In
addition to the stock option grant, in accordance with the terms of
the employment agreement between National American University and
Dr. Ronald Shape, for fiscal year 2018 Dr. Shape received $83,352
in common stock as part of his annual base pay.
Fiscal Year 2017
During
fiscal year 2017, Dr. Shape, Dr. Priddy and Dr. Paxton received
restricted stock units of 61,250, 30,000 and 30,000 respectively,
under the 2013 Restricted Stock Unit Plan with the following
performance-based vesting schedule.
|
Audited
Operating Income/Loss Metric as of May 31, 2017
|
Percentage of Restricted
Stock
Units that will
vest
|
|
Income equal to or
greater than $0
|
100
%
|
|
Loss equal to or
less than ($2,750,000) and
greater than
$0
|
67
%
|
|
Loss equal to or
less than ($3,250,000) and
greater than
($2,750,000)
|
50
%
|
|
Loss greater than
($3,250,000)
|
0
%
|
None of
the restricted stock units vested as audited operating loss as of
May 31, 2017 was greater than ($3,250,000).
Each of
Dr. Ronald Shape, Dr. Lynn Priddy, and Dr. Robert Paxton was
granted 3,750, 1,500 and 1,500 shares of common stock,
respectively, as merit awards.
Each of
Dr. Ronald Shape, Dr. Lynn Priddy, and Dr. Robert Paxton was also
granted stock options to purchase 3,750, 1,500 and 1,500 shares,
respectively. Half of the options were immediately exercisable upon
the grant date of October 20, 2016, and the other half exercisable
on June 1, 2017.
In
addition to the stock option grant, in accordance with the terms of
the employment agreement between National American University and
Dr. Ronald Shape, for fiscal year 2017 Dr. Shape received
$35,692.20 in common stock as part of his annual base
pay.
Annual and Quarterly Incentives
Dr. Ronald L. Shape.
For fiscal years ended May 31, 2018 and 2017, pursuant to the terms
of his employment agreement, Dr. Shape was eligible to receive
annual incentive pay. Annual incentive pay was determined in
accordance with the following guidelines and other terms and
exclusions as set forth in his employment agreement and was paid
75% in cash and 25% in Company stock under the 2009 Plan. Operating
ratio was calculated by dividing total operating expenses by total
revenue, except that the operating expenses and gross profit do not
include: provisions for state and federal income taxes; interest
income; interest expense; contribution to the Company’s
401(k) retirement program; gains and losses from securities;
extraordinary items shown on the financial statement and gains or
losses from the sale of major corporate properties outside the
normal course of business; business expansion and development
expenses and income from the inception through a period of two
years from the date of enrollment of the first student at any new
campus, location or program; accrued annual bonus calculations for
the chief executive officer; and compensation expense of and for
the Board.
|
Performance Guidelines
|
|
Payout
|
|
Company
achieves an operating ratio (total operating expenses over total
revenue) of less than 90%
|
|
No
annual incentive pay
|
|
Company
achieves an operating ratio (total operating expenses over total
revenue) of equal to or less than 80%
|
|
Annual
incentive pay of 1% of the Company’s total revenue (less Dr.
Shape’s base salary)
|
|
Company
achieves an operating ratio (total operating expenses over total
revenue) between 80% and 90%
|
|
Prorated
annual incentive pay
|
In
accordance with the above annual incentive pay guidelines, no
additional annual incentive pay was awarded to Dr. Shape in fiscal
years 2018 and 2017.
Dr. Lynn Priddy and Dr. Robert Paxton
Fiscal Year 2018
For
fiscal year 2018, Dr. Priddy and Dr. Paxton were eligible for
quarterly and annual achievement awards based on achieving
predetermined performance objectives and targets for the Company.
Dr. Priddy and Dr. Paxton were eligible for quarterly achievement
awards based on meeting the Company’s budgeted quarterly
pre-tax profit margins and certain quarterly organizational
objectives related to institutional effectiveness goals. The amount
of the quarterly achievement awards were calculated quarterly by
taking the appropriate percentage multiplied by their current
annual base salaries. They would receive a percentage of their
annual base salaries each quarter based on achieving the objectives
listed below. The maximum amount of quarterly achievement award
that each of Dr. Priddy and Dr. Paxton was entitled to receive in
fiscal 2018 was 80% of her or his annual base salary. We are not
disclosing the quarterly profit margin targets because we believe
such disclosure would cause us competitive harm in that it would
reveal confidential future business plans and objectives. We set
our quarterly profit margin targets based on our confidential
strategic business plan and budget. Because our revenue and
expenditure projections are based on our internal forecasts and
confidential information about our business and developed primarily
as a tool to facilitate strategic planning, disclosure of the
profit targets would cause us significant competitive harm. Based
on our prior years’ quarterly profit figures and our
strategic business plans and objectives, we believe these profit
targets were set sufficiently high to provide incentive to achieve
a high level of performance. We believed it was difficult, although
not unattainable, for the targets to be reached and, therefore, no
more likely than unlikely that the targets will be
reached
.
|
Quarterly
Objectives
|
|
Percentage
of
Annual Base
Salary
|
|
Description
|
|
1
|
|
10% per quarter
|
|
For achieving the approved budgeted NAUH pre-tax profit margin for
the quarter.
|
|
|
|
5% per quarter
|
|
For achieving less than 100% but greater than 90% of the approved
budgeted NAUH pre-tax profit margin.
|
|
2
|
|
10% per quarter
|
|
For achieving a performance index of 90% or better for overall
performance for the quarter.
|
|
|
|
5% per quarter
|
|
For achieving a performance index of greater than 80% and less than
90% for overall performance for the quarter.
|
As a
result of performance objectives and targets achieved, Dr. Priddy
and Dr. Paxton earned $18,500 and $19,000 in quarterly achievements
awards, respectively.
For
fiscal year 2018, annual achievement award component was based on
the Company’s actual earnings before interest and taxes, or
EBIT, for fiscal year 2018. To the extent that the actual EBITs for
the fiscal year exceeded the budgeted EBITs for the fiscal year, as
determined by the Board, each of Dr. Priddy and Dr. Paxton was
eligible to receive 5% of the excess up to a maximum of 75% of her
or his annual base salary. The Company’s actual EBIT for the
fiscal year 2018 did not exceed the budgeted EBIT, so no additional
annual achievement award was paid for the fiscal year
2018.
Fiscal Year 2017
For
fiscal year 2017, Dr. Priddy and Dr. Paxton were eligible for
quarterly and annual achievement awards based on achieving
predetermined performance objectives and targets for the Company.
Dr. Priddy and Dr. Paxton were eligible for quarterly achievement
awards based on meeting the Company’s budgeted quarterly
pre-tax profit margins and certain quarterly organizational
objectives related to institutional effectiveness goals. The amount
of the quarterly achievement awards were calculated quarterly by
taking the appropriate percentage multiplied by their current
annual base salaries. They would receive a percentage of their
annual base salaries each quarter based on achieving the objectives
listed below. The maximum amount of quarterly achievement award
that each of Dr. Priddy and Dr. Paxton was entitled to receive in
fiscal 2017 was 80% of her or his annual base salary.
We are not disclosing the quarterly profit margin
targets because we believe such disclosure would cause us
competitive harm in that it would reveal confidential future
business plans and objectives. We set our quarterly profit margin
targets based on our confidential strategic business plan and
budget. Because our revenue and expenditure projections are based
on our internal forecasts and confidential information about our
business and developed primarily as a tool to facilitate strategic
planning, disclosure of the profit targets would cause us
significant competitive harm. Based on our prior years’
quarterly profit figures and our strategic business plans and
objectives, we believe these profit targets were set sufficiently
high to provide incentive to achieve a high level of performance.
We believed it was difficult, although not unattainable, for the
targets to be reached and, therefore, no more likely than unlikely
that the targets will be reached.
|
Quarterly
Objectives
|
|
Percentage of
Annual Base
Salary
|
|
Description
|
|
1
|
|
10% per quarter
|
|
For achieving the approved budgeted NAUH pre-tax profit margin for
the quarter.
|
|
|
|
5% per quarter
|
|
For achieving less than 100% but greater than 90% of the approved
budgeted NAUH pre-tax profit margin.
|
|
2
|
|
10% per quarter
|
|
For achieving a performance index of 90% or better for overall
performance for the quarter.
|
|
|
|
5% per quarter
|
|
For achieving a performance index of greater than 80% and less than
90% for overall performance for the quarter.
|
As a
result of performance objectives and targets achieved, Dr. Priddy
and Dr. Paxton earned $18,324 and $19,000 in quarterly achievements
awards, respectively.
For
fiscal year 2017, annual achievement award component was based on
the Company’s actual EBIT for fiscal year 2017. To the extent
that the actual EBITs for the fiscal year exceeded the budgeted
EBITs for the fiscal year, as determined by the Board, each of Dr.
Priddy and Dr. Paxton was eligible to receive 5% of the excess up
to a maximum of 75% of her or his annual base salary. The
Company’s actual EBIT for the fiscal year 2017 did not exceed
the budgeted EBIT, so no additional annual achievement award was
paid for the fiscal year 2017.
Outstanding Equity Awards at Fiscal
Year-End
As of
fiscal year ended May 31, 2018, the restricted stock units that
were granted to our named executive officers in fiscal year 2018
did not vest and were forfeited, as further described above under
“Equity Awards.”
|
|
Option
Awards
|
||
|
Name
|
Number
of
securities
underlying
unexercised
options
(#)
exercisable
|
Option
exercise
price
($)
|
Option
expiration
date
|
|
|
|
|
|
|
Dr. Ronald L.
Shape
|
3,750
(1)
|
$
3.11
|
10/20/2024
|
|
|
53,954
(2)
|
$
3.06
|
10/20/2025
|
|
|
3,750
(3)
|
$
1.96
|
10/20/2026
|
|
|
3,750
(5)
|
$
1.72
|
10/20/2027
|
|
|
|
|
|
|
Dr. Robert
Paxton
|
1,875
(1)
|
$
3.11
|
10/20/2024
|
|
|
9,521
(2)
|
$
3.06
|
10/20/2025
|
|
|
1,500
(3)
|
$
1.96
|
10/20/2026
|
|
|
1,250
(5)
|
$
1.72
|
10/20/2027
|
|
|
|
|
|
|
Dr. Lynn
Priddy
|
15,000
(4)
|
$
3.67
|
1/22/2024
|
|
|
10,000
(2)
|
$
3.06
|
10/20/2025
|
|
|
1,500
(3)
|
$
1.96
|
10/20/2026
|
|
|
1,250
(5)
|
$
1.72
|
10/20/2027
|
__________________________________________________
(1)
These stock options were immediately exercisable
upon the grant date of October 20, 2014.
(2)
These stock options
were granted on October 20, 2015, and vested in full as of June 1,
2016.
(3)
These stock options
were granted on October 20, 2016, and vested in full as of June 1,
2017.
(4)
These stock options
were granted on January 21, 2015, and vested in full as of June 1,
2015.
(5)
These stock options
were granted on October 20, 2017, and vested in full as of June 1,
2018
Employment Agreements
National American
University, a division of Dlorah, our wholly-owned subsidiary,
currently has an employment agreement with Dr. Shape. There are no
employment agreements or arrangements, whether written or
unwritten, for Dr. Paxton or Dr. Priddy, other than the
compensation plan which is described above under Quarterly and
Annual Achievement Awards.
Dr. Ronald L. Shape
On
August 30, 2012, NAU entered into an executive employment
agreement, dated effective as of June 1, 2012, with Dr. Shape (the
“Employment Agreement”). The Employment Agreement
replaced and superseded Dr. Shape’s prior employment
agreement with the Company dated effective as of June 1, 2011 (the
“Prior Agreement”). The term of Dr. Shape’s
Employment Agreement continues until terminated by either party,
upon mutual written agreement of both parties or upon resignation
by the CEO upon twenty-four (24) calendar months’ written
notice. The Employment Agreement provides for an initial annual
base compensation of $427,500 to be paid as follows: $327,500 in
cash or current funds and $100,000 in stock or other equity under
the Company’s 2009 Stock Option and Compensation Plan (the
“2009 Plan”). Commencing with NAU’s fiscal year
beginning June 1, 2013 and for each of NAU’s fiscal years
thereafter during the term of the agreement, Dr. Shape’s base
annualized salary will be increased or decreased by the appropriate
percentage increase or decrease in the Consumer Price Index –
US City Average – All Urban Consumers. The Employment
Agreement provides that if Dr. Shape is continuously employed
through the last day of a fiscal year, he is entitled to receive
“Annual Incentive Pay” for such fiscal year, determined
and paid according to the guidelines set forth in the agreement and
to be paid 75% in cash and 25% in stock or other equity under the
Company’s 2009 Plan. The Employment Agreement also provides
that Dr. Shape is entitled to participate in NAU’s benefit
programs for its employees, to take up to five weeks paid time off
and to be reimbursed for his business expenses.
In the
event that Dr. Shape’s employment is terminated for
“cause,” Dr. Shape will be entitled to (i) his base
salary then in effect, prorated to the date of termination, (ii)
all fringe benefits through the date of termination, and (iii) the
remaining installments due, if any, for any Annual Incentive Pay
earned for a NAU fiscal year prior to the final year that includes
Dr. Shape’s date of termination. In the event that Dr.
Shape’s employment is terminated without “cause,”
Dr. Shape will be entitled to receive, as liquidated damages, (i)
his then current base salary, payable monthly, for two years after
termination or until he is again employed by another employer,
whichever occurs first, and (ii) COBRA and continuation premiums
for monthly health and dental insurance to continue the coverage in
effect at termination for Dr. Shape and his dependents for a period
of twelve months following termination. Dr. Shape will be entitled
to receive the liquidated damages only if he signs and does not
rescind a severance agreement at the time of
termination.
The
Employment Agreement includes a clawback provision whereby Dr.
Shape may be required, upon certain triggering events, to repay all
or a portion of the payments and benefits provided under the
Employment Agreement, pursuant to any clawback policy adopted by or
applicable to the Company pursuant to the Dodd-Frank Wall Street
Reform and Consumer Protection Act, any Securities and Exchange
Commission rule, any applicable listing standard promulgated by any
national securities exchange or national securities association, or
any other legal requirement. The Employment Agreement includes an
agreement by Dr. Shape that he will not disclose any confidential
information of NAU at any time during or after employment. In
addition, the covenant not to compete set forth in the Employment
Agreement will terminate 24 months after termination of Dr.
Shape’s employment with NAU.
Director Compensation and Benefits
Our
compensation committee periodically reviews the total compensation
paid to non-management directors. The purpose of the review is to
ensure that the level of compensation is appropriate to attract and
retain a diverse group of directors with the breadth of experience
necessary to perform the Board’s duties, and to fairly
compensate directors for their service. The compensation committee
considers the time and effort required for service on the Board, a
Board committee and as a committee chair, and to the extent
available reviews Board compensation survey information for
comparably sized public companies.
For
fiscal year ended May 31, 2018, non-employee directors of the
Company received a retainer, pro-rated at $30,000 per annum.
Directors also received $4,000 for each committee he or she served
on, while the Audit committee chair received $15,000 and the
Compensation committee chair received $10,000. In addition, each
non-employee director received restricted stock in an amount equal
to $20,000
based on the
closing price of our common stock on the date of grant, as well as
1,000 shares of common stock. The Company’s directors and
their dependents received health insurance coverage under our
health care plan or equivalent payment for premium costs if the
director declines health insurance coverage. Mr. Buckingham
received an annual retainer of $100,000 for serving as the chairman
of our Board. Dr. Gallentine received an annual retainer of
$130,000 for serving as vice-chairman of our Board.
The
following table summarizes the compensation earned by our
non-management directors during fiscal 2018:
Director
Compensation
|
Name
|
Fees Earned
or
Paid in
Cash
($)
|
Stock
Awards
($)
|
All Other
Compensation
($)
|
Total
($)
|
|
|
|
|
|
|
|
Robert
Buckingham
|
0
|
0
|
17,164
(1)
|
17,164
|
|
Dr. Jerry L.
Gallentine
|
150,000
(4)
|
0
|
3,949
(2)
|
153,949
|
|
Jeffrey B.
Berzina
|
34,000
|
18,202
|
5,442
(3)
|
57,644
|
|
Dr. Therese K.
Crane
|
38,000
|
18,202
|
5,442
(3)
|
61,644
|
|
Richard L.
Halbert
|
40,000
|
18,202
|
5,442
(3)
|
63,644
|
|
Dr. Thomas D.
Saban
|
49,000
|
18,202
|
5,442
(3)
|
72,644
|
|
James
Rowan
|
80,000
|
18,202
|
5,442
(3)
|
103,644
|
|
Dr. Edward
Buckingham
|
30,000
|
0
|
5,442
(3)
|
35,442
|
___________________
(1)
Consists of $13,882 in
health insurance benefits and $3,282 in use of company
plane.
(2)
Consists of $486 in
use of company plane for commuting between his home in Kansas to
the Company and $3,463 in country club dues.
(3)
Represents health
insurance benefits.
(4)
Includes $20,000
for service on our Board of Governors.
Beneficial Ownership of Principal Stockholders, Directors and
Management
The
table presented below shows information regarding the beneficial
ownership of our common stock as of
August 14, 2018
by:
●
each person or
entity known by us to own beneficially more than 5% of our
outstanding common stock;
●
each of our
directors;
●
each of our named
executive officers; and
●
all of our
directors and executive officers as a group.
As of
August 14, 2018
, 24,348,425
shares of our common stock were issued and
outstanding.
The
information in the following table has been presented in accordance
with the rules of the SEC. Under the SEC rules, beneficial
ownership of a class of capital stock includes any shares of such
class as to which a person, directly or indirectly, has or shares
voting power or investment power and also any shares as to which a
person has the right to acquire such voting or investment power
within 60 days through the exercise of any stock option, warrant or
other right. If two or more persons share voting power or
investment power with respect to specific securities, each such
person is deemed to be the beneficial owner of such securities.
Except as we otherwise indicate below and under applicable
community property laws, we believe that the beneficial owners of
the common stock listed below, based on information they have
furnished to us, have sole voting and investment power with respect
to the shares shown. Unless otherwise specified, the address of
each of our directors, executive officers and each person or entity
known by us to beneficially own more than 5% of our outstanding
common stock is c/o National American University Holdings, Inc.,
5301 Mt. Rushmore Road, Rapid City, South Dakota
57701.
|
Name and Address
of
Beneficial
Owner
|
Amount and
Nature of
Beneficial
Ownership
|
Percent of
Class
|
|
H. & E. Buckingham Limited
Partnership
|
10,156,905
|
41.7
%
|
|
|
|
|
|
Robert D. Buckingham Living
Trust
|
3,457,864
|
14.2
%
|
|
|
|
|
|
Camden Partners III SPV,
LLC
|
2,199,449
(1)
|
9.0
%
|
|
|
|
|
|
T. Rowe Price Associates,
Inc.
|
2,414,703
(2)
|
9.9
%
|
|
|
|
|
|
Michael Joseph
Hilyard
|
1,094,376
(3)
|
4.5
%
|
|
|
|
|
|
Robert D.
Buckingham
|
|
|
|
Co-Vice Chairman of the Board of
Directors
|
13,614,769
(4)
|
55.9
%
|
|
|
|
|
|
Dr. Ronald L.
Shape
|
|
|
|
President, Chief Executive Officer
and Director
|
464,363
(5)
|
1.9
%
|
|
|
|
|
|
Dr. Robert
Paxton
|
|
|
|
President of
Strategic Initiatives and External Relations
|
29,845
(6)
|
*
|
|
|
|
|
|
Dr. Edward D.
Buckingham
|
|
|
|
Chairman of the Board of
Directors
|
45,175
(7)
|
*
|
|
|
|
|
|
Dr. Jerry L.
Gallentine
|
|
|
|
Co-Vice Chairman
of the Board of Directors
|
83,000
(8)
|
*
|
|
|
|
|
|
Dr. Lynn Priddy
|
|
|
|
Provost and Chief Academic
Officer
|
12,750
(9)
|
*
|
|
|
|
|
|
Dr. Therese K.
Crane
|
|
|
|
Director
|
75,415
(10)
|
*
|
|
|
|
|
|
Dr. Thomas D.
Saban
|
|
|
|
Director
|
44,307
(11)
|
*
|
|
|
|
|
|
Richard L.
Halbert
|
|
|
|
Director
|
56,577
(12)
|
*
|
|
|
|
|
|
Jeffrey B.
Berzina
|
|
|
|
Director
|
43,733
(13)
|
*
|
|
|
|
|
|
James A. Rowan
|
|
|
|
Director
|
34,440
(14)
|
*
|
|
All directors and executive
officers
as a group (of 11
individuals)
|
14,504,374
|
56.6
%
|
|
*
|
Less
than 1%.
|
|
|
|
|
(1)
|
Based
on information contained in reports on Schedule 13G and Schedule
13D/A filed with the SEC on January 22, 2018. All of the 2,199,449
shares were transferred on January 17, 2018 by Camden Partners
Strategic Fund III, L.P. and Camden Partners Strategic Fund III-A,
L.P. to Camden Partners III SPV, L.P., in exchange for limited
partnership interests in Camden Partners III SPV, L.P. As a result
of the transfer, each of Camden Partners Strategic Fund III, L.P.,
Camden Partners Strategic Fund III-A, L.P., Camden Partners
Strategic III, LLC, Camden Partners Strategic Manager, LLC and
Donald W. Hughes ceased to beneficially own any shares. J. Todd
Sherman, the managing member of Camden Partners Strategic Manager,
LLC, and David L. Warnock are the two managers of Camden Partners
III SPV, LLC, the general partner of Camden Partners III SPV, L.P.
As a result, J. Todd Sherman, David L. Warnock, Camden Partners III
SPV, L.P. and Camden Partners III SPV, LLC reported that each had
shared voting power over 2,199,449 shares and shared dispositive
power over 2,199,449 shares. Camden Partners III SPV, LLC, as the
general partner of Camden Partners III SPV, L.P., J. Todd Sherman
and David L. Warnock each be deemed to beneficially own the shares
held by Camden Partners III SPV, L.P.
|
|
|
|
|
(2)
|
Based
on information contained in a report on Schedule 13G/A filed with
the Securities and Exchange Commission on February 14, 2018 by T.
Rowe Price Small-Cap Value Fund, Inc. and T. Rowe Price Associates,
Inc., each of which has its principal business office at 100 East
Pratt Street, Baltimore, Maryland 21202. February 14, 2017, T. Rowe
Price Associates, Inc. reported that it had sole voting power over
312,503 shares and sole dispositive power over 2,414,703 shares,
and T. Rowe Price Small-Cap Value Fund, Inc. reported that it had
sole voting power over 2,102,200 shares and sole dispositive power
over 0 shares.
|
|
|
|
|
(3)
|
Based
on information contained in a report on Schedule 13G filed with the
Securities and Exchange Commission on November 3, 2016 by Michael
Joseph Hillyard and Cara Marie Hillyard, each of whom has his and
her principal business office at 5378 Chandler Bend Drive,
Jacksonville, Florida 32224. As of November, 3, 2016, Michael
Hillyard reported that he had sole voting and dispositive power
over 110,542 shares and shared voting and dispositive power over
1,094,376 shares, and Cara Hillyard reported that she had sole
voting and dispositive power over 72,645 shares and shared voting
and dispositive power over 1,094,376 shares.
|
|
|
|
|
(4)
|
Consists
of common stock and common stock warrants owned by the H. & E.
Buckingham Limited Partnership and the common stock owned by the
Robert D. Buckingham Living Trust. Mr. Buckingham is the general
partner of the H. & E. Buckingham Limited Partnership and in
this capacity has sole power to direct the vote and disposition of
our securities held by the H. & E. Buckingham Limited
Partnership. Mr. Buckingham disclaims beneficial ownership of our
securities owned by the H. & E. Buckingham Limited Partnership
except to the extent of any pecuniary interest therein. As the
trustee for the Robert D. Buckingham Living Trust, Mr. Buckingham
is deemed to have sole voting and dispositive power of our
securities held by the trust and is deemed to be the beneficial
owner of all our securities owned by the Robert D. Buckingham
Living Trust.
|
|
|
|
|
(5)
|
Includes
options to purchase 53,394 shares of common stock of the
Company.
|
|
|
|
|
(6)
|
Includes
options to purchase 1,250 shares of common stock of the
Company.
|
|
|
|
|
(7)
|
Consists
of common stock owned by Buckingham Interests, L.P. Dr. Buckingham
is the general partner of Buckingham Interests L.P. and in this
capacity has sole power to direct the vote and disposition of our
securities held by Buckingham Interests L.P.
|
|
|
|
|
(8)
|
Includes
9,523 time-based restricted shares of common stock of the Company
which vest on October 3, 2018.
|
|
|
|
|
(9)
|
Includes
options to purchase 1,250 shares of common stock of the
Company.
|
|
|
|
|
(10)
|
Includes
9,523 time-based restricted shares of common stock of the Company
which vest on October 3, 2018.
|
|
|
|
|
(11)
|
Includes
9,523 time-based restricted shares of common stock of the Company
which vest on October 3, 2018 and 20 shares owned by a child of Dr.
Saban and over which Dr. Saban has sole voting
control..
|
|
|
|
|
(12)
|
Includes
9,523 time-based restricted shares of common stock of the Company
which vest on October 3, 2018, 13,300 shares held jointly by Mr.
Halbert’s wife and over which Mr. Halbert has shared voting
control, 1,000 shares held by Mr. Halbert’s individual
retirement account and over which Mr. Halbert has sole voting
control, and 1,000 shares held by Mr. Halbert’s wife’s
individual retirement account and over which Mr. Halbert has no
voting control.
|
|
|
|
|
(13)
|
Includes
9,523 time-based restricted shares of common stock of the Company
which vest on October 3, 2018.
|
|
|
|
|
(14)
|
Includes
9,523 time-based restricted shares of common stock of the Company
which vest on October 3, 2018.
|
Section 16(a) Beneficial O
wnership Reporting Compliance
Based
on our review of reports filed with the SEC by our directors,
executive officers and beneficial owners of more than 10 percent of
our common stock regarding their ownership and transactions in our
common stock, we believe that each executive officer, director and
10 percent beneficial owner complied with all filing requirements
in a timely manner under Section 16(a) of the Securities
Exchange Act of 1934, as amended, during fiscal 2018, except for
Joseph Sallustio’s Form 4 filed on September 28, 2017 with
respect to a grant of restricted stock units, Anthony
DeAngelis’ Form 4 filed on September 28, 2017 with respect to
a grant of restricted stock units, David Heflin’s Form 4
filed on September 28, 2017 with respect to a grant of restricted
stock units, Priddy Lynn’s Form 4 filed on September 28, 2017
with respect to a grant of restricted stock units, Robert
Paxton’s Form 4 filed on September 28, 2017 with respect to a
grant of restricted stock units, Paul Sedlacek’s Form 4 filed
on September 28, 2017 with respect to a grant of restricted stock
units, Ronald Shape’s Form 4 filed on September 28, 2017 with
respect to a grant of restricted stock units, and John
Woolsey’s Forms 4 filed on January 18, 2018 with respect to a
stock sale and September 28, 2018 with respect to a grant of
restricted stock units.
Audit Committee Report
Our
audit committee is responsible for retaining the Company’s
independent registered public accounting firm and approving the
services it will perform. Pursuant to the charter adopted by the
Board on November 30, 2009, the audit committee acts on behalf of
the Board to oversee our financial reporting processes and the
adequacy of our internal controls. The audit committee reviews
financial and operating reports and disclosures, including our
reports filed on Forms 10-K and 10-Q. The audit committee also
reviews the performance of the Company’s internal auditor and
independent registered public accounting firm.
Management
is responsible for the reporting processes and the preparation and
presentation of financial statements and the implementation and
maintenance of internal controls. Our independent registered public
accounting firm is responsible for expressing an opinion on the
conformity of the Company’s audited financial statements to
accounting principles generally accepted in the United States. The
audit committee’s responsibility is to monitor and oversee
these processes.
In
connection with our consolidated financial statements for the
fiscal year ended May 31, 2018, the audit committee
has:
●
reviewed
and discussed the audited financial statements and the fair and
complete presentation of the Company’s results with
management and representatives of Deloitte & Touche LLP, our
independent registered public accounting firm for fiscal
2018;
●
discussed
with Deloitte & Touche LLP the matters required to be discussed
by Auditing Standard No. 1301 (Communications with Audit
Committees), as adopted by the Public Company Accounting Oversight
Board; and
●
received
the written disclosures and the letter from Deloitte & Touche
LLP required by the applicable requirements of the Public Company
Accounting Oversight Board regarding Deloitte & Touche
LLP’s communications with the audit committee concerning
independence, and has discussed the independence of Deloitte &
Touche LLP with representatives of Deloitte & Touche
LLP.
Based
on the review and discussions referred to above, the audit
committee recommended to the Company’s Board that the
Company’s audited financial statements be included in the
Company’s Annual Report on Form 10-K for the fiscal year
ended May 31, 2018 for filing with the Securities and Exchange
Commission.
AUDIT COMMITTEE
Dr. Thomas D. Saban, Chair
Dr. Therese K. Crane
Mr. Jeffrey B. Berzina
PROPOSAL NUMBER 2—STOCKHOLDER ADVISORY VOTE TO APPROVE
EXECUTIVE COMPENSATION
As
required by Section 14A of the Securities Exchange Act of 1934, as
amended, we are submitting to stockholders our annual
“say-on-pay proposal,” a non-binding advisory vote to
approve the compensation of our named executive officers as
described in this proxy statement.
As
discussed in the Executive and Director Compensation section, our
compensation philosophy is designed to attract and retain
highly-talented individuals, provide rewards for strong business
results and individual performance, and motivate executives to
maximize long-term stockholder returns. The program is competitive
in the marketplace, highly incentive-based to align interests of
executives with those of stockholders, and balanced across
incentives to appropriately mitigate risk.
We
are asking our stockholders to indicate their support and approval
for our named executive officer compensation as described under the
Executive and Director Compensation section of this proxy
statement. We believe that our compensation program for our named
executive officers is designed to create value for our stockholders
over the long-term, and provides for appropriate
pay-for-performance alignment.
For
the reasons summarized above, and as discussed in more detail in
the Executive and Director Compensation section of this proxy
statement, our Board of Directors is asking our stockholders to
vote for the following advisory resolution:
RESOLVED, that the compensation paid to the Company’s named
executive officers, as disclosed in the Company’s Proxy
Statement for the 2018 Annual Meeting of the Stockholders is hereby
approved.
The
say-on-pay vote is advisory, and therefore not binding on our
compensation committee or our Board. Nevertheless, our Board and
our compensation committee value the opinions expressed by
stockholders in their vote on this proposal and will consider the
outcome of the vote in deciding whether to take any action as a
result of the vote and when making future compensation decisions
for our named executive officers.
Board Voting Recommendation
The Board unanimously recommends that the
stockholders vote “
FOR
” the proposal to approve, on an advisory
basis, the compensation of our named executive
officers.
PROPOSAL NUMBER 3—ADOPTION OF 2018 STOCK OPTION AND
COMPENSATION PLAN
We are
asking our stockholders to approve the National American University
Holdings, Inc. 2018 Stock Option and Compensation Plan (the
“2018 Plan”). On August 10, 2018, the Board adopted,
upon recommendation of the compensation committee and subject to
stockholder approval, the 2018 Plan.
Long-term equity
compensation plays an important part in the Company’s
pay-for-performance philosophy. Our compensation program emphasizes
stock-based compensation, encouraging our executive officers and
other employees and non-employee directors to think and act as
long-term stockholders.
The
purpose of the 2018 Plan is to promote the interests of the Company
and our stockholders by aiding us in attracting and retaining
employees, officers, consultants, independent contractors and
non-employee directors capable of assuring the future success of
the Company, to provide such persons with opportunities for stock
ownership in the Company and to offer such persons other incentives
to put forth maximum efforts for the success of the Company’s
business. The 2018 Plan will allow us to provide such persons an
opportunity to acquire a proprietary interest in the Company, and
align the interests of such persons with our
stockholders.
Reasons for Adopting the 2018 Plan
We
currently make awards of stock options, stock appreciation rights,
restricted stock and restricted stock units, performance awards,
dividend equivalents and other stock-based awards to executive
officers and other employees under our 2009 Stock Option and
Compensation Plan (the “2009 Plan”). The total number
of shares of common stock authorized for issuance under the 2009
Plan is 1,300,000. We are asking our stockholders to approve the
2018 Plan so that the Company will have an adequate number of
shares authorized to make appropriate levels of stock incentive
awards to officers, other employees and non-employee directors in
2018 and beyond. The Compensation Committee does not believe a
sufficient number of shares of common stock remain available for
issuance under the 2009 Plan for equity awards the Compensation
Committee anticipates granting prior to our 2019 Annual Meeting of
Stockholders.
The
Board believes that the continuation of the Company’s
stock-based compensation program is essential in attracting,
retaining and motivating highly qualified executive officers and
other employees and non-employee directors to enhance the success
of the Company. Unless the 2018 Plan is adopted, the Board has
concluded that the Company will need to curtail grants of stock
incentive awards to executive officers, other employees and
non-employee directors. The Board believes this result will have a
significantly negative impact on the Company’s compensation
program and objectives. Accordingly, the Board recommends adoption
of the 2018 Plan in order to allow the Company to have the ability
to continue to grant stock options, stock appreciation rights,
restricted stock and restricted stock units, performance awards,
dividend equivalents and other stock-based awards at current
levels.
If the
2018 Plan is approved by our stockholders, the Company may continue
to grant awards under the 2009 Plan until no additional shares
remain available for future awards under the 2009 Plan (although,
whether or not the Company does not grant any additional awards
under the 2009 Plan, all outstanding awards previously granted
under the 2009 Plan will remain outstanding and subject to the
terms of the 2009 Plan), but no shares subject to any outstanding
awards under the 2009 Plan that are forfeited, cancelled or
reacquired by the Company will become available for re-issuance
under the 2018 Plan or the 2009 Plan. In addition, if the 2018 Plan
is approved by our stockholders, the 2013 Plan will terminate and
no additional awards will be granted under the 2013 Plan. The Board
has previously approved the termination of the 2013 Plan subject to
the approval by the stockholders of the 2018 Plan.
Key Features of the 2018 Plan
The
2018 Plan is an omnibus equity incentive plan that allows the
Company to grant stock options, stock appreciation rights,
restricted stock and restricted stock units, performance awards,
dividend equivalents and other stock-based awards to employees,
officers, consultants, independent contractors and non-employee
directors.
The following is a summary
of the material provisions of the 2018 Plan and is qualified in its
entirety by reference to the complete text of the 2018 Plan, a copy
of which is attached to this proxy statement as Appendix A. We
encourage you to read the actual text of the 2018 Plan in its
entirety.
Eligibility.
Employees, officers, consultants and directors of the Company or
its subsidiaries are eligible to participate in the 2018
Plan.
Shares Authorized.
The 2018 Plan reserves a total of 1,800,000 shares of common stock
for awards under the 2018 Plan. The aggregate number of shares
which may be issued under the Plan as incentive stock options is
100,000. Shares that are subject to awards that terminate, lapse or
are cancelled or forfeited will be available again for grant under
the 2018 Plan.
Certain Limitations.
If this proposal is approved by our stockholders, the limit on the
equity awards that may be granted to a participant other than
non-employee directors in any fiscal year would be 200,000 shares,
or in the case of cash awards, $3,000,000, and the limit on the
equity awards that may be granted to a non-employee director in any
fiscal year would be 25,000 shares.
Types of Awards.
The
2018 Plan authorizes the following types of awards:
●
Stock
Options
. The grants of either non-qualified or incentive
stock options to purchase shares of our common stock are permitted
under the 2018 Plan. Incentive stock options are intended to
qualify for favorable tax treatment under the Internal Revenue Code
to participants in the 2018 Plan. The stock options will provide
for the right to purchase shares of common stock at a specified
price and will become exercisable after the grant date under the
terms established by the compensation committee. The per share
option exercise price may not be less than 100% of the fair market
value of a share of common stock on the grant date.
●
Stock
Appreciation Rights
. Awards of stock appreciation rights
(SARs) are permitted under the 2018 Plan. SARs provide the holder
with a right to receive in cash or in shares of common stock upon
exercise the excess of the fair market value of one share of our
common stock on the date of exercise, over the grant price of the
SARs. The grant price of SARs may not be less than 100% of the fair
market value of a share of common stock on the grant
date.
●
Restricted
Stock and Restricted Stock Units
. Awards of restricted stock
and restricted stock units are permitted under the 2018 Plan,
subject to any restrictions that the compensation committee
determines to impose, such as satisfaction of performance measures
or a performance period, or restrictions on the right to vote or
receive dividends.
●
Performance
Awards
. Performance awards, denominated in shares of common
stock, are permitted under the 2018 Plan. Performance awards must
be contingent upon the attainment of one or more performance goals
within a performance period designated by the compensation
committee. Performance awards may be settled or payable in shares
of common stock or in cash. The recipient of a performance award
has no rights as a stockholder with respect to the shares of common
stock subject to the award until the performance conditions have
been satisfied. For purposes of the 2018 Plan, performance goals
must be based exclusively on one or more of the following
corporate-wide or subsidiary, division or operating unit financial
measures: (1) pre-tax or after-tax income (before or after
allocation of corporate overhead and bonus), (2) net income
(before or after taxes), (3) reduction in expenses,
(4) pre-tax or after-tax operating income, (5) earnings
(including earnings before taxes, earnings before interest and
taxes, or earnings before interest, taxes, depreciation and
amortization), (6) gross revenue, (7) working capital,
(8) profit margin or gross profits, (9) share price,
(10) cash flow or cash flow per share (before or after
dividends), (11) cash flow return on investment,
(12) return on capital (including return on total capital or
return on invested capital), (13) return on assets or net
assets, (14) market share, (15) pre-tax or after-tax
earnings per share, (16) pre-tax or after-tax operating
earnings per share, (17) total stockholder return,
(18) growth measures, including revenue growth, as compared
with a peer group or other benchmark, (19) economic
value-added models or equivalent metrics, (20) comparisons
with various stock market indices, (21) improvement in or
attainment of expense levels or working capital levels,
(22) operating margins, gross margins or cash margins,
(23) year-end cash, (24) debt reductions,
(25) stockholder equity, (26) regulatory achievements,
(27) implementation, completion or attainment of measurable
objectives with respect to research, development, products or
projects, production volume levels, acquisitions and divestitures
and recruiting and maintaining personnel, (28) customer
satisfaction, (29) operating efficiency, productivity ratios,
or (30) strategic business criteria, consisting of one or more
objectives based on meeting specified revenue, market penetration,
geographic business expansion goals (including accomplishing
regulatory approval for projects), cost or cost savings targets,
accomplishing critical milestones for projects, and goals relating
to acquisitions or divestitures, or any combination thereof (in
each case before or after such objective income and expense
allocations or adjustments as the compensation committee may
specify within the applicable period).
●
Stock
Awards
. Awards of our common stock without restrictions are
permitted under the 2018 Plan, but such grants may be subject to
any terms and conditions the compensation committee may
determine.
●
Other
Stock-Based Awards
. Grants of other types of awards that are
denominated or payable in, valued in whole or in part by reference
to, or otherwise based on or related to, shares of common stock,
subject to the terms and conditions established by the compensation
committee, are permitted under the 2018 Plan. Shares of common
stock, or other securities delivered pursuant to a purchase right
granted by such an award, must be purchased for consideration
having a value equal to at least 100% of the fair market value of
common stock on the date the purchase right is
granted.
●
Cash
Awards
. Grants of cash awards, subject to the terms and
conditions established by the compensation committee, are permitted
under the 2018 Plan.
●
Dividend
Equivalents
. Awards of dividend equivalents pursuant to
which the recipient is entitled to receive payments in cash, shares
of common stock, other securities or other property as determined
by the compensation committee based on the amount of cash dividends
paid by the Company to holders of common stock are permitted under
the 2018 Plan. Dividend equivalents awards may also be subject to
any terms and conditions established by the compensation
committee.
Transfer
Restrictions.
In general, awards under the 2018 Plan may not
be transferred except upon death, by will or the laws of descent
and distribution, or pursuant to a transfer to a family member that
is expressly permitted by the compensation committee.
Adjustment for Certain
Corporate Changes.
In the event of a stock split, stock
dividend, recapitalization, reorganization, merger or similar event
that affects shares of common stock such that an adjustment is
required to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the 2018
Plan, then the compensation committee must, in such manner as it
deems equitable, make appropriate adjustments to (1) the
number of shares of common stock available for awards under the
2018 Plan, and subject to outstanding awards and (2) the
purchase or exercise price of outstanding awards. If the Company
acquires or combines with another company with a pre-existing plan
approved by shareholders and not adopted in contemplation of the
acquisition or combination, the shares available for grant under
the pre-existing plan may be used for awards under the 2018 Plan.
Such awards cannot be made after the date awards or grants could
have been made under the pre-existing plan, absent the acquisition
or combination, and can only be made to individuals who were not
employees or directors of the Company or any affiliate prior to
such acquisition or combination.
Change in Control.
If the Company is a party to a merger, exchange or reorganization,
outstanding awards will be subject to the terms and conditions of
any agreement of merger, exchange or reorganization which may
include, without limitation, accelerating the vesting or exercise
date of awards and the cancellation of outstanding awards in
exchange for payment of their cash equivalent.
Amendment.
The Board
may amend the 2018 Plan at any time, however, prior approval of the
stockholders of the Company shall be required for any amendment to
the 2018 Plan which (1) requires stockholder approval under
the rules or regulations of the Securities and Exchange Commission,
the NASDAQ Stock Market LLC, or any other securities exchange that
are applicable to the Company, (2) increases the number of
shares authorized under the 2018 Plan; (3) increases the
number of shares subject to the limitations contained in
Section 4(d) of the 2018 Plan; (4) permits repricing of
options or stock appreciation rights without prior shareholder
approval; or (5) permits the award of options or stock
appreciation rights at a price less than 100% of the fair market
value of a share on the date of grant contrary to the provisions of
the 2018 Plan.
Term.
The term of
the 2018 Plan expires ten years after the date of its adoption,
unless earlier terminated by the Board.
Federal Income Tax Consequences
The
following is a brief overview of the U.S. federal income tax
consequences generally arising with respect to awards under the
2018 Plan. This summary is not intended to be exhaustive and does
not describe state, local or FICA tax consequences.
Tax Consequences to
Participants.
The tax consequences to a participant depend
on the type of award granted under the 2018 Plan.
●
Stock
Options
Non-Qualified Stock Options.
A
participant does not recognize income at the time a non-qualified
stock option is granted. At the time of exercise of the
non-qualified stock option, the participant recognizes ordinary
income in an amount equal to the difference between the amount paid
for the shares subject to the option (the “exercise
price”) and the fair market value of the shares (assuming the
shares subject to the option are unrestricted). When the
participant sells the shares acquired on exercise of the option,
any appreciation (or depreciation) in the value of the shares after
the date of exercise is short-term or long-term capital gain (or
loss) depending on how long the shares have been held.
Incentive Stock Options.
Options that
qualify as incentive stock options (ISOs) are entitled to special
tax treatment. As with nonqualified stock options, a participant
does not recognize income at the time an ISO is granted. However,
unlike with non-qualified stock options, if the ISO holding period
requirement is satisfied, the participant does not recognize income
(for purposes of regular income tax) at the time of exercise
(although the participant may be required to recognize income for
purposes of the alternative minimum tax). The ISO holding period
requirement is satisfied if the shares acquired on exercise of the
ISO are held for at least two years from the ISO grant date and one
year from the ISO exercise date. If this requirement is met, when
the participant sells the shares acquired on the ISO exercise, any
appreciation (or depreciation) in the value of the shares over the
exercise price is short-term or long-term capital gain (or loss)
depending on how long the shares have been held.
If a
participant sells the shares acquired on exercise of an ISO before
satisfying the ISO holding period requirement, the participant has
a “disqualifying disposition” of the shares at the time
they are sold. Upon the disqualifying disposition, the participant
has ordinary income equal to the lesser of: (1) the fair
market value of the shares on the date of exercise of the ISO less
the exercise price; and (2) the sales price of the shares less
the exercise price.
●
Stock
Appreciation Rights.
A participant does not recognize income
at the time a SAR is granted. When a SAR is exercised, the
participant recognizes income equal to the amount of cash and the
fair market value of any unrestricted shares received on the
exercise.
●
Restricted
Stock.
A participant granted shares of restricted stock does
not recognize income at the time of grant unless the participant
makes an election (an “83(b) election”) to be taxed at
such time. Instead, the participant recognizes ordinary income at
the time the restrictions lapse in an amount equal to the excess of
the fair market value of the shares at such time over the amount,
if any, paid for the shares. Any dividends paid to the participant
with respect to the shares of restricted stock are treated as
compensation income, rather than dividend income, until the
restrictions lapse. When the participant sells the shares, any
appreciation (or depreciation) in the value of the shares after the
date the restrictions lapse is short-term or long-term capital gain
(or loss) depending on how long the shares have been held since the
date the restrictions lapse.
If a
participant granted shares of restricted stock properly makes an
83(b) election with respect to the shares, the participant
recognizes ordinary income on the date of grant equal to the excess
of the fair market value of the shares at such time over the
amount, if any, paid for the shares. Any dividends paid after the
83(b) election to the participant with respect to the shares of
restricted stock are treated as dividend income, rather than
compensation income, and will be eligible for treatment as
“qualified dividends” if the other requirements are
met. The participant does not recognize any income at the time the
restrictions lapse. When the participant sells the shares, any
appreciation (or depreciation) in the value of the shares after the
date of grant of the shares is short-term or long-term capital gain
(or loss) depending on how long the shares have been held since the
date of grant.
●
Restricted
Stock Units, Performance Awards, and Dividend Equivalents
. A
participant granted restricted stock units, performance awards or
dividend equivalents does not recognize income at the time of
grant. The participant generally recognizes ordinary income at the
time the award is payable to him or her equal to the cash or the
value of the shares received at that time. When the participant
sells any shares received, any appreciation (or depreciation) in
the value of the shares after they are received is short term or
long-term capital gain (or loss) depending on how long the shares
have been held.
●
Cash Awards and
Stock Awards.
A participant granted a cash award recognizes
ordinary income at the time of grant equal to the amount of cash
received. A participant granted a stock award recognizes ordinary
income at the time of grant equal to the fair market value of the
shares granted less the amount, if any, paid for the shares. When
the participant sells the shares, any appreciation (or
depreciation) in the value of the shares after they are received is
short-term or long-term capital gain (or loss) depending on how
long the shares have been held.
●
Other
Stock-Based Awards.
If a participant is granted another type
of stock-based award under the plan, the participant will recognize
income on the award based on the nature of the award.
●
Tax
Consequences to the Company.
To the extent that a
participant recognizes ordinary income in the circumstances
described above, the Company or the subsidiary for which the
participant performs services will be entitled to a corresponding
deduction if, among other things, the income meets the test of
reasonableness, is an ordinary and necessary business expense, is
not an “excess parachute payment” within the meaning of
Section 280G of the Internal Revenue Code. Section 162(m) does
not allow a deduction greater than $1 Million per tax year for the
compensation paid to the CEO, CFO, and the three highest paid
employees other than the CEO and CFO. Beginning January 1, 2017,
the limit applies also to individuals that were formerly in these
positions. Any payments that the participant recognizes as ordinary
income will be considered “compensation” subject to the
162(m) limit for the covered employees.
New Plan Benefits
The
amount of any future grants under the 2018 Plan are subject to the
discretion of the compensation committee, and therefore future
awards to our named executive officers and other employees under
the 2018 Plan are not determinable.
The closing price of a share of our
common stock as reported on the Nasdaq Global Market on
August
14, 2018
, the
record date for our 2018 Annual Meeting, was
$0.98.
Securities Authorized for Issuance Under Equity Compensation
Plans
The
following table sets forth information about our common stock that
may be issued upon the exercise of options, warrants and rights
under all of our existing compensation plans (including individual
compensation arrangements) under which our equity securities are
authorized for issuance as of May 31, 2018, which includes our 2009
Plan and our 2013 Plan. Both of these plans have been approved by
our stockholders.
|
Plan
category
|
Number
of
securities to
be
issued
upon
exercise
of
outstanding
options,
warrants
and
rights
|
Weighted-average
exercise price
of
outstanding
options,
warrants
and
rights
|
Number of
securities remaining available for future issuance
under
equity
compensation
plans
(excluding
securities
reflected
in
column
(a))
|
|
|
(a)
|
(b)
|
(c)
|
|
Equity compensation
plans approved by stock holders
|
193,350
|
$
3.54
|
967,335
|
|
Total
|
193,350
|
$
3.54
|
967,335
|
(a)
Includes grants of
stock options, time-based restricted stock awards, and performance
based restricted stock units. For purposes of the table above, the
number of shares to be issued under performance based restricted
stock units reflects the maximum number of shares that may be
issued; the actual number of shares to be issued will depend on the
results of operations during the fiscal year ending May 31, 2018,
and beyond
(b)
Includes weighted
average exercise price of stock options only.
(c)
The Board has
approved the termination of the 2013 Plan subject to the approval
by the stockholders of the proposal included in this proxy
statement to adopt the 2018 Plan. In the event the 2013 Plan is
terminated, the number of securities available under our existing
compensation plans would be reduced by 750,000 shares.
Board Voting Recommendation
The
Board unanimously recommends that the stockholders vote
“
FOR
” the
proposal to adopt the 2018 Plan.
PROPOSAL NUMBER 4—RATIFICATION OF APPOINTMENT OF OUR
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Based
on the recommendation of the audit committee, the Board has
selected Deloitte & Touche LLP (“Deloitte”) as our
independent registered public accounting firm for the fiscal year
that began June 1, 2018 and has further directed that
management submit the selection of Deloitte for ratification by
stockholders at the annual meeting. Deloitte audited our financial
statements as of and for the year ended May 31, 2018. A
representative of Deloitte is expected to be present at the Annual
Meeting. The representative will have an opportunity to make a
statement if he or she so desires and will be available to respond
to appropriate questions.
None
of the provisions of our Bylaws, other governing documents or
applicable law require stockholder ratification of the selection of
Deloitte as our independent registered public accounting firm. The
Board is submitting the selection of Deloitte to the stockholders
for ratification, however, as a matter of good corporate practice.
If the stockholders fail to ratify the selection, the Board will
reconsider whether or not to retain that firm. Even if the
selection is ratified, the Board in its discretion may direct the
appointment of a different independent registered public accounting
firm at any time during the year if the Board determines that such
a change would be in the best interests of us and our
stockholders.
The
affirmative vote of the holders of a majority of the shares present
in person or represented by proxy and entitled to vote at the
annual meeting will be required to ratify the selection of
Deloitte.
Independent Registered Public Accounting Firm Fees and
Services
For the
fiscal years ended May 31, 2018 and 2017, Deloitte served as
our independent registered public accounting firm. The following
table presents the aggregate fees incurred for audit and
audit-related services rendered by Deloitte during fiscal years
2018 and 2017, respectively. The fees listed below were
pre-approved by our audit committee.
|
Service
Type
|
Fiscal
2018
|
Fiscal
2017
|
|
|
|
|
|
Audit Fees
(1)
|
$
520,000
|
$
440,000
|
|
Audit-Related
Fees
(2)
|
59,480
|
71,158
|
|
Tax
Fees
|
0
|
28,600
|
|
All Other
Fees
|
9,400
(3)
|
0
|
|
Total
|
$
588,880
|
$
539,758
|
______________________
|
(1)
|
Consists
of fees billed for professional services rendered for the audit of
our year-end financial statements and services in connection with
regulatory filings.
|
|
|
|
|
(2)
|
Consists
of travel, sales tax and other expenses related to audit
services.
|
|
|
|
|
(3)
|
Consists
of fees associated with consulting for Henley Putnam University
asset acquisition.
|
The
audit committee, after a review and discussion with Deloitte of the
preceding information, determined that the provision of these
services was compatible with maintaining Deloitte’s
independence.
Audit Committee Pre-Approval Policies and Procedures
The
audit committee adopted pre-approval policies and procedures for
audit and non-audit services on November 30, 2009. Since the date
of adoption, the audit committee has approved all of the services
performed by Deloitte.
Board Voting Recommendation
The Board recommends that stockholders vote
“
FOR
”
the proposal to ratify the appointment of Deloitte
& Touche LLP as our independent registered public accounting
firm for the fiscal year ending on May 31,
2019.
If the appointment of Deloitte & Touche LLP
were not ratified by the stockholders, the Board would not be
required to appoint another independent registered public
accounting firm, but would give consideration to an unfavorable
vote.
OTHER BUSINESS
Management
does not intend to present any matters at the meeting other than
those disclosed in this proxy statement, and we are not presently
aware of any matter that may be presented at the meeting by others.
However, if other matters properly come before the meeting, it is
the intention of the persons named in the enclosed form of proxy to
vote on those matters in accordance with their best
judgment.
DELIVERY OF PROXY MATERIALS TO HOUSEHOLDS
SEC
rules allow us to deliver a single copy of an annual report and
proxy statement to any household at which two or more stockholders
reside. This eliminates duplicate mailings that stockholders living
at the same address receive, and it reduces our printing and
mailing costs.
If
your household would like to revoke your householding consent and
receive single rather than duplicate mailings in the future, please
write to Broadridge Financial Solutions Inc., Householding
Department, at 51 Mercedes Way, Edgewood, New York 11717, or call
800-542-1061. You will be removed from the householding program
within 30 days of receipt of the revocation of your consent. If a
broker or other nominee holds your shares, you may continue to
receive some duplicate mailings. Certain brokers will eliminate
duplicate account mailings by allowing stockholders to consent to
such elimination, or through implied consent if a stockholder does
not request continuation of duplicate mailings. Since not all
brokers and nominees offer stockholders the opportunity to
eliminate duplicate mailings, you may need to contact your broker
or nominee directly to discontinue duplicate mailings from your
broker to your household.
Your
household may have received a single set of proxy materials this
year. If you would like to receive another copy of this
year’s proxy materials, please write to Broadridge Investor
Communications Solutions, Householding Department, 51 Mercedes Way,
Edgewood, New York 11717, or call 800-542-1061.
STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETING
Any stockholder proposal intended to be presented
for consideration at the 2019 Annual Meeting of Stockholders and to
be included in our proxy statement for that meeting must comply
with all applicable rules and regulations of the SEC and be
received in writing by the Corporate Secretary of the Company at
5301 Mt. Rushmore Road, Rapid City, South Dakota
57701
no later than May 23, 2019. The Company reserves
the right to reject, rule out of order, or take other appropriate
action with respect to any proposal that does not comply with these
and other applicable requirements.
By Order of the Board of Directors
|
|
|
Ronald L. Shape
|
|
President and Chief Executive Officer
|
|
September 21, 2018
|
IMPORTANT NOTICE REGARDING THE
AVAILABILITY OF PROXY MATERIALS FOR THE 2018 ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON OCTOBER 9, 2018.
Our Proxy Statement for the 2018 Annual Meeting of
the Stockholders and Annual Report for the year ended May 31, 2018
are available at
http://www.proxyvote.com
.
NATIONAL AMERICAN UNIVERSITY HOLDINGS, INC
.
2018 STOCK OPTION AND COMPENSATION PLAN
Section 1
.
Purpose of the Plan; Effect on Prior
Plans
. The purpose of the National American University
Holdings, Inc. 2018 Stock Option and Compensation Plan (the
“
Plan
”) is to
aid National American University Holdings, Inc. (the
“
Company
”) in
recruiting and retaining employees, officers, Directors, and other
Consultants capable of assuring the future success of the Company
through the grant of Awards to such persons under the Plan. The
Company expects that Awards of stock-based compensation and
opportunities for stock ownership in the Company will provide
incentives to Plan participants to exert their best efforts for the
success of the Company’s business and thereby align the
interests of Plan Participants with those of the Company’s
stockholders.
Section 2
.
Definitions
The
following capitalized terms used in the Plan have the meanings set
forth in this Section 2:
(a)
“
Affiliate
”
means (i) any entity that, directly or indirectly through one or
more intermediaries, is controlled by the Company and (ii) any
entity in which the Company has a significant equity interest, in
each case as determined by the Committee.
(b)
“
Award
”
means any Option, Stock Appreciation Right, Restricted Stock,
Restricted Stock Unit, Dividend Equivalent, Performance Award,
Stock Award, Other Stock-Based Award, or Cash Award granted under
the Plan.
(c)
“
Award
Agreement
” means any written agreement, contract or
other instrument or document evidencing an Award granted under the
Plan. Each Award Agreement shall be subject to the applicable terms
and conditions of the Plan and any other terms and conditions (not
inconsistent with the Plan) determined by the
Committee.
(d)
“
Board
”
means the Board of Directors of the Company.
(e)
“
Cash
Award
” means any Award granted under Section 7(d) of
the Plan that is payable in cash and denominated as a “Cash
Award.”
(f)
“
Change
in Control
”
means the occurrence of any of the
following:
a.
A “change in
ownership,” as described in Section 1.409A-3(i)(5)(v) of the
Treasury Regulations.
b.
A “change in
effective control,” as described in Section
1.409A-3(i)(5)(vi) of the Treasury Regulations, but substituting
“50 percent” for “30 percent” in the first
sentence of Section 1.409A-3(i)(5)(vi)(A)(1).
c.
A “change in
ownership of a substantial portion of the assets,” as
described in Section 1.409A-3(i)(5)(vii) of the Treasury
Regulations, but substituting “50 percent” for
“40 percent” in the first sentence
thereof.
(g)
“
Code
”
means the Internal Revenue Code of 1986, as amended from time to
time, and any regulations promulgated thereunder.
(h)
“
Committee
”
means the Compensation Committee of the Board or any successor
committee of the Board designated by the Board to administer the
Plan. The Committee shall be comprised of not less than such number
of Directors as shall be required to permit Awards granted under
the Plan to qualify under Rule 16b-3, and each member of the
Committee shall be a “Non-Employee Director” within the
meaning of Rule 16b-3.
(i)
“
Company
”
means National American University Holdings, Inc., a Delaware
corporation.
(j)
“
Consultant
”
means an individual who renders services to the Company in a
non-employee capacity, including a Non-Employee
Director.
(k)
“
Director
”
means a member of the Board.
(l)
“
Dividend
Equivalent
” means any right granted under Section 7(e)
of the Plan.
(m)
“
Eligible
Person
” means any employee, officer, Director or other
Consultant of the Company or any Affiliate.
(n)
“
Exchange
Act
” means the Securities Exchange Act of 1934, as
amended.
(o)
“
Fair
Market Value
” means, with respect to any property
(including, without limitation, any Shares or other securities),
the fair market value of such property determined by such methods
or procedures as shall be established from time to time by the
Committee. Notwithstanding the foregoing, unless otherwise
determined by the Committee, the Fair Market Value of Shares on a
given date for purposes of the Plan shall be the closing sale price
of the Shares on the principal United States Securities Exchange
registered under the Exchange Act on which the Shares are listed
(the “
Exchange
”)
on the applicable date. If the Exchange is closed for trading on
such date, then the last sale price used shall be the one on the
date the Shares last traded on the Exchange.
(p)
“
Incentive
Stock Option
”
means an option granted under
Section 6(a) of the Plan that is intended to meet the requirements
of Section 422 of the Code or any successor provision, as set forth
in part in Section 6(a)(iv).
(q)
“
Non-Employee
Director
”
means a Director who is not an
employee of the Company or an Affiliate.
(r)
“
Non-Qualified
Stock Option
” means an option granted under Section
6(a) of the Plan that is not intended to be an Incentive Stock
Option.
(s)
“
Option
”
means an Incentive Stock Option or a Non-Qualified Stock
Option.
(t)
“
Other
Stock-Based Award
” means any stock-based right granted
under Section 7(d) of the Plan.
(u)
“
Participant
”
means an Eligible Person who is designated by the Committee to be
granted an Award under the Plan.
(v)
“
Performance
Award
” means any right granted under Section 7(b) of
the Plan.
(w)
“
Performance
Goals
” means the goals established by the Committee,
which shall be satisfied or met as a condition to the
exercisability, vesting or receipt of all or a portion of an Award.
Such goals shall be based exclusively on one or more of the
following corporate-wide or subsidiary, division or operating unit
financial measures: (1) pre-tax or after-tax income (before or
after allocation of corporate overhead and bonus), (2) net income
(before or after taxes), (3) reduction in expenses, (4) pre-tax or
after-tax operating income, (5) earnings (including earnings before
taxes, earnings before interest and taxes, or earnings before
interest, taxes, depreciation and amortization, (6) gross revenue,
(7) working capital, (8) profit margin or gross profits, (9) Share
price, (10) cash flow or cash flow per Share (before or after
dividends), (11) cash flow return on investment, (12) return on
capital (including return on total capital or return on invested
capital), (13) return on assets or net assets, (14) market share,
(15) pre-tax or after-tax earnings per Share, (16) pre-tax or
after-tax operating earnings per Share, (17) total stockholder
return, (18) growth measures, including revenue growth, as compared
with a peer group or other benchmark, (19) economic value-added
models or equivalent metrics, (20) comparisons with various stock
market indices, (21) improvement in or attainment of expense levels
or working capital levels, (22) operating margins, gross margins or
cash margins, (23) year-end cash, (24) debt reductions, (25)
stockholder equity, (26) regulatory achievements, (27)
implementation, completion or attainment of measurable objectives
with respect to research, development, products or projects,
production volume levels, acquisitions and divestitures and
recruiting and maintaining personnel, (28) customer satisfaction,
(29) operating efficiency, productivity ratios, or (30) strategic
business criteria, consisting of one or more objectives based on
meeting specified revenue, market penetration, geographic business
expansion goals (including accomplishing regulatory approval for
projects), cost or cost savings targets, accomplishing critical
milestones for projects, and goals relating to acquisitions or
divestitures, or any combination thereof (in each case before or
after such objective income and expense allocations or adjustments
as the Committee may specify within the applicable period). Each
such goal may be expressed on an absolute and/or relative basis,
may be based on or otherwise employ comparisons based on current
internal targets, the past performance of the Company (including
the performance of one or more subsidiaries, divisions and/or
operating units) and/or the past or current performance of other
companies, and in the case of earnings-based measures, may use or
employ comparisons relating to capital (including, but limited to,
the cost of capital), stockholders’ equity and/or shares
outstanding, or to assets or net assets. In all cases, the
performance goals shall be such that the achievement of such goals
is substantially uncertain at the time that they are established,
and that the award opportunity be defined in such a way that a
third party with knowledge of the relevant facts could determine
whether and to what extent the performance goal has been met, and,
subject to the Committee’s right to exercise its discretion
to reduce or eliminate the amount of the Award, the amount of the
Award payable as a result of such performance. To the extent
applicable, the measures used in setting performance goals set
under the Plan for any given performance period shall be determined
in accordance with GAAP and in a manner consistent with the methods
used in the Company’s audited financial statements, without
regard to: (i) extraordinary items as determined by the
Company’s independent public accountants in accordance with
GAAP; (ii) changes in accounting, unless, in each case, the
Committee decides otherwise within the applicable period; or (iii)
non-recurring acquisition expenses and restructuring charges.
Notwithstanding the foregoing, in calculating operating earnings or
operating income (including on a per Share basis), the Committee
may, within the applicable period for a given performance period,
provide that such calculation shall be made on the same basis as
reflected in a release of the Company’s earnings for a
previously completed period as specified by the Committee. For
purposes hereof, the “applicable period,” with respect
to any performance period, is the period commencing on or before
the first day of the performance period and ending no later than
the earlier of (x) the ninetieth (90
th
) day of the
performance period, or (y) the date on which twenty-five percent
(25%) of the performance period has been completed.
(x)
“
Person
”
means any individual, corporation, partnership, association or
trust.
(y)
“
Plan
”
means the National American University Holdings, Inc. 2018 Stock
Option and Compensation Plan, as may be amended from time to
time.
(z)
“
Restricted
Stock
” means any Share granted under Section 7(a) of
the Plan.
(aa)
“
Restricted
Stock Unit
”
means any unit granted under
Section 7(a) of the Plan evidencing the right to receive a Share
(or a cash payment equal to the Fair Market Value of a Share) at
some future date.
(bb)
“
Rule
16b-3
” means Rule 16b-3 promulgated by the Securities
and Exchange Commission under the Exchange Act or any successor
rule or regulation.
(cc)
“
Section
162(m)
” means Section 162(m) of the Code, or any
successor provision, and the applicable Treasury Regulations
promulgated thereunder.
(dd)
“
Shares
”
means shares of common stock, par value of $0.0001 per share, of
the Company or such other securities or property as may become
subject to Awards pursuant to an adjustment made under Section 4(c)
of the Plan.
(ee)
“
Stock
Appreciation Right
” means any right granted under
Section 6(b) of the Plan.
(ff)
“
Stock
Award
” means any Share granted under Section 7(c) of
the Plan.
Section 3
. Administration
(a)
Power
and Authority of the Committee
. The Plan shall be
administered by the Committee. Subject to the express provisions of
the Plan and to applicable law, the Committee shall have full power
and authority to: (i) designate Participants; (ii) determine the
type or types of Awards to be granted to each Participant under the
Plan; (iii) determine the number of Shares to be covered by (or the
method by which payments or other rights are to be calculated in
connection with) each Award; (iv) determine the terms and
conditions of any Award or Award Agreement; (v) amend the terms and
conditions of any Award or Award Agreement; provided, however,
that, except as otherwise provided in Section 4(c) hereof, the
Committee shall not, without receiving prior approval of the
Company’s stockholders, reprice, adjust or amend the exercise
price of Options or the grant price of Stock Appreciation Rights
previously awarded to any Participant, whether through amendment,
cancellation and replacement grant, or any other means; (vi)
accelerate the exercisability of any Award or the lapse of
restrictions relating to any Award; (vii) determine whether, to
what extent and under what circumstances Awards may be exercised in
cash, Shares, other securities, other Awards or other property, or
canceled, forfeited or suspended; (viii) determine whether, to what
extent and under what circumstances cash, Shares, other securities,
other Awards, other property and other amounts payable to a
Participant with respect to an Award under the Plan shall be
deferred either automatically or at the election of the holder of
the Award or the Committee; (ix) interpret and administer the Plan
and any instrument or agreement, including any Award Agreement,
relating to the Plan; (x) establish, amend, suspend or waive such
rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (xi)
make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of
the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations and other decisions
under or with respect to the Plan or any Award or Award Agreement
shall be within the sole discretion of the Committee, may be made
at any time and shall be final, conclusive and binding upon any
Participant, any holder or beneficiary of any Award or Award
Agreement, and any employee or Consultant of the Company or any
Affiliate.
(b)
Action
of the Committee
.
A majority of
the Committee shall constitute a quorum. The acts of the Committee
shall be either: (i) acts of a majority of the members of the
Committee present at any meeting at which a quorum is present; or
(ii) acts approved in writing by all of the members of the
Committee without a meeting. The Committee may appoint a chair or a
secretary as it deems appropriate.
(c)
Delegation
.
The Committee may delegate its powers and duties under the Plan to
one or more Directors or executive officers of the Company, or a
committee of Directors or executive officers, subject to such
terms, conditions and limitations as the Committee may establish in
its sole discretion; provided, however, that the Committee may not
delegate its power and authority with regard to: (i) the grant of
an Award to any person who is a “covered employee”
within the meaning of Section 162(m) of the Code or who, in the
Committee’s judgment, is likely to become a covered employee
at any time during the period an Award hereunder to such employee
would be outstanding; or (ii) the selection for participation in
the Plan of an officer or other person subject to Section 16 of the
Exchange Act or decisions concerning the timing, pricing or amount
of an Award to such an officer or other person.
(d)
Power
and Authority of the Board of Directors
. Notwithstanding
anything to the contrary contained herein, the Board may, at any
time and from time to time, without any further action of the
Committee, exercise the powers and duties of the Committee under
the Plan.
(e)
Liability
and Indemnification of Plan Administrators
.
No member of the Board or the
Committee, nor any executive officer to whom the Committee
delegates any of its power and authority hereunder, shall be liable
for any act, omission, interpretation, construction or
determination made in connection with the Plan in good faith, and
the members of the Board, the Committee and the executive officers
shall be entitled to indemnification and reimbursement by the
Company in respect of any claim, loss, damage or expense (including
attorneys’ fees) arising therefrom to the full extent
permitted by law, except as otherwise may be provided in the
Company’s Certificate of Incorporation, Bylaws, and under any
directors’ and officers’ liability insurance that may
be in effect from time to time.
Section 4
. Shares Available for Awards
(a)
Shares
Available
. Subject to adjustment as provided in Section 4(c)
of the Plan, the aggregate number of Shares that may be issued
under all Awards under the Plan shall be 1,800,000. Shares to be
issued under the Plan will be authorized but unissued Shares or
Shares that have been reacquired by the Company and designated as
treasury shares. Shares that are subject to Awards that terminate,
lapse or are cancelled or forfeited shall be available again for
grant under the Plan. If the purchase price of any Shares with
respect to an Option is satisfied by delivering Shares already
owned by the Participant to the Company (by either actual delivery
or attestation), only the number of Shares delivered to the
Participant, net of the Shares delivered to the Company or attested
to, shall be deemed delivered for purposes of determining the
number of Shares available for further Awards. Shares that are
tendered by a Participant or withheld by the Company in a
“cashless” exercise as full or partial payment to the
Company of the purchase or exercise price relating to an Award or
to satisfy tax withholding obligations relating to an Award shall
not be available for future grants under the Plan. In addition, if
Stock Appreciation Rights are settled in Shares upon exercise, the
aggregate number of Shares subject to the Award rather than the
number of Shares actually issued upon exercise shall be counted
against the number of Shares authorized under the
Plan.
(b)
Accounting
for Awards
. For purposes of this Section 4, if an Award
entitles the holder thereof to receive or purchase Shares, the
number of Shares covered by such Award or to which such Award
relates shall be counted on the date of grant of such Award against
the aggregate number of Shares available for granting Awards under
the Plan.
(c)
Adjustments
.
In the event that any dividend or other distribution (whether in
the form of cash, Shares, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase
or exchange of Shares or other securities of the Company, issuance
of warrants or other rights to purchase Shares or other securities
of the Company or other similar corporate transaction or event
affects the Shares such that an adjustment is required to prevent
dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Committee
shall, in such manner as it may deem equitable, adjust any or all
of: (i) the number and type of Shares (or other securities or other
property) that thereafter may be made the subject of Awards; (ii)
the number and type of Shares (or other securities or other
property) subject to outstanding Awards; and (iii) the purchase or
exercise price with respect to any Award.
Additionally, in
the event that a company acquired by the Company or any Affiliate
or with which the Company or any Affiliate combines has shares
available under a pre-existing plan approved by stockholders and
not adopted in contemplation of such acquisition or combination,
the shares available for grant pursuant to the terms of such
pre-existing plan (as adjusted, to the extent appropriate, using
the exchange ratio or other adjustment or valuation ratio or
formula used in such acquisition or combination to determine the
consideration payable to the holders of common stock of the
entities party to such acquisition or combination) may be used for
Awards under the Plan and shall not reduce the Shares authorized
for grant under the Plan; provided that Awards using such available
shares shall not be made after the date awards or grants could have
been made under the terms of the pre-existing plan, absent the
acquisition or combination, and shall only be made to individuals
who were not employees or Directors of the Company or any Affiliate
prior to such acquisition or combination.
(d)
Award
Limitations
(i)
Overall
Limitation
. No Participant may be granted an Award or Awards
under the Plan for more than 200,000 Shares (subject to adjustment
as provided in Section 4(c) of the Plan) in the aggregate in any
fiscal year, or, in the case of a Cash Award pursuant to Section
7(d) of the Plan, for more than $3,000,000 in any fiscal
year.
(ii)
Incentive
Stock Option Limitation.
The aggregate number of Shares
which may be issued under the Plan as Incentive Stock Options is
100,000 (subject to adjustment as provided in Section 4(c) of the
Plan).
(iii)
Non-Employee
Director Limitation
. No Non-Employee Director may be granted
an Award or Awards under the Plan for more than 25,000 Shares
(subject to adjustment as provided in Section 4(c) of the Plan) in
the aggregate in any fiscal year.
Section 5
. Eligibility
Any
Eligible Person may be designated to be a Participant. In
determining which Eligible Persons shall receive an Award and the
terms of any Award, the Committee may take into account the nature
of the services provided by the respective Eligible Persons, their
present and potential contributions to the success of the Company
or such other factors as the Committee, in its discretion, shall
deem relevant. The Committee’s selection of an Eligible
Person to be a Participant with respect to an Award shall not
require the Committee to select such Eligible Person to receive any
other Award at any time.
An
Incentive Stock Option may be granted to full-time or part-time
employees (which term as used herein includes, without limitation,
officers and Directors who are also employees) only, and an
Incentive Stock Option shall not be granted to an employee of an
Affiliate unless such Affiliate is also a “subsidiary
corporation” of the Company within the meaning of Section
424(f) of the Code or any successor provision.
Section 6
. Options and Stock Appreciation
Rights
(a)
Options
.
The Committee may grant Options with the following terms and
conditions and with such additional terms and conditions not
inconsistent with the provisions of the Plan as the Committee shall
determine:
(i)
Exercise
Price
. The purchase price per Share purchasable under an
Option shall be determined by the Committee and shall not be less
than 100% of the Fair Market Value of a Share on the date of grant
of such Option; provided, however, that the Committee may designate
a per share exercise price below Fair Market Value on the date of
grant if the Option is granted in substitution for a stock option
previously granted by an entity that is acquired by or merged with
the Company or an Affiliate.
(ii)
Option
Term
. The term of each Option shall be fixed by the
Committee but shall not be longer than 10 years from the date of
grant.
(iii)
Time
and Method of Exercise
. The Committee shall determine the
time or times at which an Option may be exercised in whole or in
part and the method or methods by which, and the form or forms in
which, payment of the exercise price with respect thereto may be
made or deemed to have been made. The Committee may permit net
settlement of any Option.
(iv)
Incentive
Stock Options.
Notwithstanding anything in the Plan to the
contrary, the following additional provisions shall apply to the
grant of Options that are intended to qualify as Incentive Stock
Options:
(A) The
aggregate Fair Market Value (determined as of date the Option is
granted) of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by any Participant
during any calendar year (under all of the Company’s plans)
shall not exceed $100,000.
(B) Any
Award Agreement granting Incentive Stock Options under the Plan
shall contain such other provisions as the Committee shall deem
advisable, but shall in all events be consistent with and contain
all provisions required in order for the Award to qualify as an
Incentive Stock Option.
(C) All
Incentive Stock Options must be granted within ten (10) years from
the earlier of the date on which the Plan is adopted by the Board
or the date the Plan is approved by the stockholders of the
Company.
(D) No
Incentive Stock Option shall be granted to a Participant who, at
the time of grant would own (within the meaning of Section 422 of
the Code) stock possessing more than ten percent (10%) of the total
combined voting power of the Company (within the meaning of Section
422 of the Code).
(b)
Stock
Appreciation Rights
.
The Committee may grant Stock
Appreciation Rights subject to the terms of the Plan and such
additional terms and conditions not inconsistent with the provision
of the Plan as the Committee shall determine. A Stock Appreciation
Right granted under the Plan shall confer on the holder thereof a
right to receive in cash or Shares (as specified by the Committee)
upon exercise thereof the excess of (i) the Fair Market Value of
one Share on the date of exercise over (ii) the grant price of the
Stock Appreciation Right as specified by the Committee, which price
shall not be less than 100% of the Fair Market Value of one Share
on the date of grant of the Stock Appreciation Right; provided,
however, that the Committee may designate a per share grant price
below Fair Market Value on the date of grant if the Stock
Appreciation Right is granted in substitution for a stock
appreciation right previously granted by an entity that is acquired
by or merged with the Company or an Affiliate.
Section 7
. Restricted Stock, Restricted Stock Units,
Performance Awards, Stock Awards, Other Stock-Based Awards and Cash
Awards, Dividend Equivalents
(a)
Restricted
Stock and Restricted Stock Units
.
The Committee may grant Awards of
Restricted Stock and Restricted Stock Units with the following
terms and conditions and with such additional terms and conditions
not inconsistent with the provisions of the Plan as the Committee
shall determine:
(i)
Restrictions
.
Shares of Restricted Stock and Restricted Stock Units shall be
subject to such restrictions as the Committee may impose
(including, without limitation, any limitation on the right to vote
a Share of Restricted Stock or the right to receive any dividend or
other right or property with respect thereto), which restrictions
may lapse separately or in combination at such time or times, in
such installments or otherwise, as the Committee may deem
appropriate. Notwithstanding the foregoing, the Committee may
permit acceleration of vesting of such Awards in the event of the
Participant’s death, disability or retirement.
(ii)
Issuance
and Delivery of Shares
. Any Restricted Stock granted under
the Plan shall be issued at the time such Awards are granted and
may be evidenced in such manner as the Committee may deem
appropriate, including book-entry registration or issuance of a
stock certificate or certificates, which certificate or
certificates shall be held by the Company. Such certificate or
certificates shall be registered in the name of the Participant and
shall bear an appropriate legend referring to the restrictions
applicable to such Restricted Stock. Shares representing Restricted
Stock that is no longer subject to restrictions shall be delivered
to the Participant promptly after the applicable restrictions lapse
or are waived. In the case of Restricted Stock Units, no Shares
shall be issued at the time such Awards are granted. Upon the lapse
or waiver of restrictions and the restricted period relating to
Restricted Stock Units evidencing the right to receive Shares, such
Shares shall be issued and delivered to the holder of the
Restricted Stock Units.
(iii)
Forfeiture
.
Except as otherwise determined by the Committee, upon a
Participant’s termination of employment or cessation of
services as a Consultant, including resignation or removal as a
Director (in either case, as determined under criteria established
by the Committee) during the applicable restriction period, all
Shares of Restricted Stock and all Restricted Stock Units held by
the Participant at such time shall be forfeited and reacquired by
the Company; provided, however, that the Committee may, when it
finds that a waiver would be in the best interest of the Company,
waive in whole or in part any or all remaining restrictions with
respect to Shares of Restricted Stock or Restricted Stock
Units.
(b)
Performance
Awards
. The Committee may grant Performance Awards
denominated in Shares that may be settled or payable in Shares
(including, without limitation, Restricted Stock or Restricted
Stock Units) or cash. Performance Awards shall be conditioned
solely on the achievement of one or more objective Performance
Goals, and such Performance Goals shall be established by the
Committee no later than the earlier of (i) the ninetieth
(90
th
) day
of the performance period, or (ii) the date on which twenty-five
percent (25%) of the performance period has been completed. Subject
to the terms of the Plan and any applicable Award Agreement, the
Performance Goals to be achieved during any performance period, the
length of any performance period, the amount of any Performance
Award granted, the amount of any payment or transfer to be made
pursuant to any Performance Award, and any other terms and
conditions of any Performance Award shall be determined by the
Committee. The Committee shall certify in writing that such
Performance Goals have been met prior to payment of the Performance
Awards.
(c)
Stock
Awards
. The Committee may grant Shares without restrictions
thereon in its discretion. Subject to the terms of the Plan, Stock
Awards may have such terms and conditions as the Committee shall
determine.
(d)
Other
Stock-Based Awards and Cash Awards
. The Committee may grant
such other Awards that are denominated or payable in, valued in
whole or in part by reference to, or otherwise based on or related
to, Shares (including, without limitation, securities convertible
into Shares), as are deemed by the Committee to be consistent with
the purpose of the Plan. The Committee shall determine the terms
and conditions of such Awards, subject to the terms of the Plan.
Shares, or other securities delivered pursuant to a purchase right
granted under this Section 7(d), shall be purchased for
consideration having a value equal to at least 100% of the Fair
Market Value of such Shares or other securities on the date the
purchase right is granted. In addition, the Committee may, in its
discretion, grant Cash Awards to Eligible Employees according to
such terms and conditions as the Committee may establish, subject
to the terms of the Plan and the Award Agreement.
(e)
Dividend
Equivalents
. The Committee may grant Dividend Equivalents
under which the Participant shall be entitled to receive payments
(in cash, Shares, other securities, other Awards or other property
as determined in the discretion of the Committee) equivalent to the
amount of any cash dividends paid by the Company to holders of
Shares with respect to a number of Shares determined by the
Committee. Subject to the terms of the Plan, such Dividend
Equivalents may have such terms and conditions as the Committee
shall determine.
Section 8
.
General Rules Applicable to
Awards
(a)
Consideration
for Awards
.
Awards may be granted for no cash consideration or for any cash or
other consideration as may be determined by the Committee or
required by applicable law.
(b)
Awards
May Be Granted Separately or Together
. Awards may, in the
discretion of the Committee, be granted either alone or in addition
to, in tandem with or in substitution for any other Award or any
award granted under any other plan of the Company or any Affiliate.
Awards granted in addition to or in tandem with other Awards or in
addition to or in tandem with awards granted under any other plan
of the Company or any Affiliate may be granted either at the same
time as or at a different time from the grant of such other Awards
or awards.
(c)
Forms
of Payment under Awards
. Subject to the terms of the Plan
and of any applicable Award Agreement, payments or transfers to be
made by the Company or an Affiliate upon the grant, exercise or
payment of an Award may be made in such form or forms as the
Committee shall determine (including, without limitation, cash,
Shares, other securities, other Awards or other property,
withholding Shares otherwise issuable under the Award, or any
combination thereof), and may be made in a single payment or
transfer, in installments or on a deferred basis, in each case in
accordance with rules and procedures established by the Committee.
Such rules and procedures may include, without limitation,
provisions for the payment or crediting of reasonable interest on
installment or deferred payments or the grant or crediting of
Dividend Equivalents with respect to installment or deferred
payments.
(d)
Term
of Awards
. The term of each Award shall be for a period not
longer than ten (10) years from the date of grant.
(e)
Limits
on Transfer of Awards
. Except as otherwise provided by the
Committee or the terms of this Plan, no Award and no right under
any such Award shall be transferable by a Participant other than by
will or by the laws of descent and distribution. The Committee may
establish procedures as it deems appropriate for a Participant to
designate a Person or Persons, as beneficiary or beneficiaries, to
exercise the rights of the Participant and receive any property
distributable with respect to any Award in the event of the
Participant’s death. The Committee, in its discretion and
subject to such additional terms and conditions as it determines,
may permit a Participant to transfer a Non-Qualified Stock Option
to any “family member” (as such term is defined in the
General Instructions to Form S-8 (or any successor to such
Instructions or such Form) under the Securities Act of 1933, as
amended) at any time that such Participant holds such Option,
provided that such transfers may not be for value (
i.e.
, the transferor may not receive
any consideration therefor) and the family member may not make any
subsequent transfers other than by will or by the laws of descent
and distribution. Each Award under the Plan or right under any such
Award shall be exercisable during the Participant’s lifetime
only by the Participant (except as provided herein or in an Award
Agreement or amendment thereto relating to a Non-Qualified Stock
Option) or, if permissible under applicable law, by the
Participant’s guardian or legal representative. No Award or
right under any such Award may be pledged, alienated, attached or
otherwise encumbered, and any purported pledge, alienation,
attachment or encumbrance thereof shall be void and unenforceable
against the Company or any Affiliate.
(f)
Restrictions;
Securities Exchange Listing
. All Shares or other securities
delivered under the Plan pursuant to any Award or the exercise
thereof shall be subject to such restrictions as the Committee may
deem advisable under the Plan, applicable federal or state
securities laws and regulatory requirements, and the Committee may
cause appropriate entries to be made or legends to be placed on the
certificates for such Shares or other securities to reflect such
restrictions. If the Shares or other securities are traded on a
securities exchange, the Company shall not be required to deliver
any Shares or other securities covered by an Award unless and until
such Shares or other securities have been admitted for trading on
such securities exchange.
Section 9
. Change in Control
In the
event that the Company is a party to a merger, exchange or
reorganization, outstanding Awards shall be subject to the terms
and conditions of the agreement of merger, exchange or
reorganization, which may include, without limitation, accelerating
the vesting or exercise date of Awards and the cancellation of
outstanding Awards in exchange for the immediate distribution of a
cash payment equal to: (a) in the case of Options and Stock
Appreciation Rights, the difference between the Fair Market Value
on the date of the Change in Control and the exercise price
multiplied by the number of Shares subject to the Option or Stock
Appreciation Right; and (b) in the case of Restricted Stock,
Restricted Stock Units, and Performance Stock Awards, the Fair
Market Value of a Share on the date of the Change in Control
multiplied by the number of Shares then subject to the
Award.
Section 10
. Amendment and Termination;
Corrections
(a)
Amendments
to the Plan
. The Board may amend, alter, suspend,
discontinue or terminate the Plan; provided, however, that,
notwithstanding any other provision of the Plan or any Award
Agreement, prior approval of the stockholders of the Company shall
be required for any amendment to the Plan that:
(i) requires
stockholder approval under the rules or regulations of the
Securities and Exchange Commission, the NASDAQ Stock Market LLC, or
any other securities exchange that are applicable to the
Company;
(ii) increases
the number of shares authorized under the Plan as specified in
Section 4(a) of the Plan;
(iii) increases
the number of Shares subject to the limitations contained in
Section 4(d) of the Plan;
(iv) permits
repricing of Options or Stock Appreciation Rights without prior
shareholder approval; or
(v) permits
the award of Options or Stock Appreciation Rights at a price less
than 100% of the Fair Market Value of a Share on the date of grant
of such Option or Stock Appreciation Right, contrary to the
provisions of Sections 6(a)(i) and 6(b) of the Plan.
(b)
Amendments
to Awards
. Subject to the provisions of the Plan, the
Committee may waive any conditions of or rights of the Company
under any outstanding Award, prospectively or retroactively. Except
as otherwise provided in the Plan, the Committee may amend, alter,
suspend, discontinue or terminate any outstanding Award,
prospectively or retroactively, but no such action may adversely
affect the rights of the holder of such Award without the consent
of the Participant or holder or beneficiary thereof.
(c)
Correction
of Defects, Omissions and Inconsistencies
.
The Committee may correct any
defect, supply any omission or reconcile any inconsistency in the
Plan or in any Award or Award Agreement in the manner and to the
extent it shall deem desirable to implement or maintain the
effectiveness of the Plan.
Section 11
. Tax Withholding
The
Company may take such action as it deems appropriate to withhold or
collect from a Participant the applicable federal, state, local or
foreign payroll, withholding, income or other taxes that are
required to be withheld or collected by the Company upon the grant,
exercise, vesting or payment of an Award. The Committee may require
the Company to withhold Shares having a Fair Market Value equal to
the amount necessary to satisfy the Company’s minimum
statutory withholding requirements upon the grant, exercise,
vesting or payment of an Award from Shares that otherwise would
have been delivered to a Participant. The Committee may, subject to
any terms and conditions that the Committee may adopt, permit a
Participant to elect to pay all or a portion of the minimum
statutory withholding taxes by: (a) having the Company withhold
Shares otherwise to be delivered upon the grant, exercise, vesting
or payment of an Award with a Fair Market Value equal to the amount
of such taxes; (b) delivering to the Company Shares other than
Shares issuable upon the grant, exercise, vesting or payment of an
Award with a Fair Market Value equal to the amount of such taxes;
or (c) paying cash. Any such election must be made on or before the
date that the amount of tax to be withheld is
determined.
Section 12
.
General Provisions
.
(a)
No
Rights to Awards
. No Eligible Person, Participant or other
Person shall have any claim to be granted any Award under the Plan,
and there is no obligation for uniformity of treatment of Eligible
Persons, Participants or holders or beneficiaries of Awards under
the Plan. The terms and conditions of Awards need not be the same
with respect to any Participant or with respect to different
Participants.
(b)
Award
Agreements
. No Participant shall have rights under an Award
granted to such Participant unless and until an Award Agreement
shall have been duly executed on behalf of the Company and, if
requested by the Company, signed by the Participant.
(c)
No
Rights of Stockholders
.
Except with respect to Restricted
Stock and Stock Awards, neither a Participant nor the
Participant’s legal representative shall be, or have any of
the rights and privileges of, a stockholder of the Company with
respect to any Shares issuable upon the exercise or payment of any
Award, in whole or in part, unless and until the Shares have been
issued.
(d)
No
Limit on Other Compensation Plans or Arrangements
. Nothing
contained in the Plan shall prevent the Company or any Affiliate
from adopting or continuing in effect other or additional
compensation plans or arrangements.
(e)
No
Right to Employment, Directorship, or to Provide Other
Services
.
The
grant of an Award shall not be construed as giving a Participant
the right to be retained as an employee of the Company or any
Affiliate, or a Director to be retained as a Director, nor any
other service provider to be retained by the Company, nor will it
affect in any way the right of the Company or an Affiliate to
terminate a Participant’s employment or other services at any
time, with or without cause. In addition, the Company or an
Affiliate may at any time dismiss a Participant from employment or
other services for the Company free from any liability or any claim
under the Plan or any Award, unless otherwise expressly provided in
the Plan or in any Award Agreement.
(f)
Governing
Law
.
The
internal law, and not the law of conflicts, of the State of
Delaware, shall govern all questions concerning the validity,
construction and effect of the Plan or any Award, and any rules and
regulations relating to the Plan or any Award.
(g)
Severability
.
If any provision of the Plan or any Award is or becomes or is
deemed to be invalid, illegal or unenforceable in any jurisdiction
or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or
deemed amended to conform to applicable laws, or if it cannot be so
construed or deemed amended without, in the determination of the
Committee, materially altering the purpose or intent of the Plan or
the Award, such provision shall be stricken as to such jurisdiction
or Award, and the remainder of the Plan or any such Award shall
remain in full force and effect.
(h)
No
Trust or Fund Created
.
Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any
kind or a fiduciary relationship between the Company or any
Affiliate and a Participant or any other Person. To the extent that
any Person acquires a right to receive payments from the Company or
any Affiliate pursuant to an Award, such right shall be no greater
than the right of any unsecured general creditor of the Company or
any Affiliate.
(i)
Securities
Matters
.
The
Company shall not be required to deliver any Shares until the
requirements of any federal or state securities or other laws,
rules or regulations (including the rules of any securities
exchange) as may be determined by the Company to be applicable are
satisfied.
(j)
No
Fractional Shares
. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award, and the Committee
shall determine whether cash shall be paid in lieu of any
fractional Share or whether such fractional Share or any rights
thereto shall be canceled, terminated or otherwise
eliminated.
(k)
Headings
.
Headings are given to the Sections and subsections of the Plan
solely as a convenience to facilitate reference. Such headings
shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision
thereof.
Section 13
. Effective Date of the Plan
The
Plan shall be subject to and be effective upon approval by the
stockholders of the Company.
Section 14
. Term of the Plan
The
Plan shall terminate at midnight on December 1, 2028, unless
terminated before then by the Board. Awards may be granted under
the Plan until the Plan terminates or until all Shares available
for Awards under the Plan have been purchased or acquired;
provided, however, that Incentive Stock Options may not be granted
following the 10-year anniversary of the Board’s adoption of
the Plan. The Plan shall remain in effect as long as any Awards are
outstanding.
