ý
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
New
Jersey
|
|
57-1150621
|
||
(State
or other jurisdiction of incorporation or organization)
|
|
(IRS
Employer Identification No.)
|
Large
accelerated filer o
|
|
Accelerated
filer x
|
|
Non-accelerated
filer o
|
1
|
||
ITEM
1.
|
1
|
|
ITEM
1A.
|
23
|
|
ITEM
1B.
|
34
|
|
ITEM
2.
|
34
|
|
ITEM
3.
|
35
|
|
ITEM
4.
|
35
|
|
36
|
||
ITEM
5.
|
36
|
|
ITEM
6.
|
39
|
|
ITEM
7.
|
41
|
|
ITEM
7A.
|
56
|
|
ITEM
8
|
57
|
|
ITEM
9.
|
57
|
|
ITEM
9A.
|
57
|
|
ITEM
9B.
|
57
|
|
58
|
||
ITEM
10.
|
58
|
|
ITEM
11.
|
58
|
|
ITEM
12.
|
58
|
|
ITEM
13.
|
58
|
|
ITEM
14.
|
58
|
|
59
|
||
ITEM
15.
|
59
|
·
|
actual
or anticipated fluctuations in our results of
operations;
|
·
|
our
failure to comply with the extensive regulatory framework applicable
to
our industry; or our
failure to obtain timely regulatory approvals in connection with
a change of control of our
company;
|
·
|
our
success in updating and expanding the content of existing programs
and
developing new programs in a cost-effective manner or on a timely
basis;
|
·
|
risks
associated with the opening of new
campuses;
|
·
|
risk
associated with integration of acquired schools;
|
·
|
industry
competition;
|
·
|
our
ability to continue to execute our growth
strategies;
|
·
|
conditions
and trends in our industry;
|
·
|
general
and economic conditions; and
|
·
|
other
factors discussed under the headings “Business,” “Risk Factors” and
“Management’s Discussion and Analysis of Financial Condition and Results
of Operations.”
|
ITEM
1.
|
BUSINESS
|
Program
Offered
|
||||||||||
Area
of Study
|
Bachelor
|
Associate
|
Diploma
or Certificate
|
Average
Enrollment
|
Percent
of Total Enrollment
|
|||||
Automotive
Technology
|
-
|
Auto
Service Management, Collision Repair, Diesel Technology, Diesel &
Truck Service Management
|
Automotive
Mechanics, Automotive Technology, Collision Repair, Diesel Truck
Mechanics, Diesel Technology, Diesel & Truck Technology, Master
Automotive Technology
|
7,288
|
41%
|
|||||
Health
Sciences
|
-
|
Medical
Assisting Technology, Medical Administrative Assistant
Technology
|
Medical
Administrative Assisting, Medical Assisting, Pharmacy Technology,
Medical
Billing and Coding, Dental Assisting, Licensed Practical
Nurse
|
5,863
|
32%
|
|||||
Skilled
Trades
|
-
|
Mechanical
/ Architectural Drafting, Electronics Engineering Technology,
HVAC
|
Electronic
Servicing, Electronics Engineering Technology, Electronics System
Technology, HVAC, Mechanical / Architectural Drafting,
Electrician
|
2,440
|
13%
|
Spa
and Culinary
|
Culinary
Management
|
Culinary
Arts
|
Culinary
Arts, Baking & Pastry, Cosmetology, Esthetics, Nail Technician,
Therapeutic, Massage & Body Technology
|
1,659
|
9%
|
|||||
Business
and Information Technology
|
-
|
PC
Systems & Networking Technology, Network Systems Administration,
Business Administration, Criminal Justice
|
Business
Administration, Graphic Web Design, Network Systems Administrating,
PC
Support Technology, Criminal Justice
|
831
|
5%
|
|||||
|
||||||||||
Total:
|
18,081
|
100%
|
School
|
Last
Accreditation Letter
|
Next
Accreditation
|
||
Philadelphia,
PA
|
December 4,
2003
|
May 1,
2008
|
||
Union,
NJ
|
June 4,
2004
|
February 1,
2009
|
||
Mahwah,
NJ*
|
December
9, 2004
|
August 1,
2009
|
||
Melrose
Park, IL
|
March
11, 2005
|
November 1,
2009
|
||
Denver,
CO
|
September
8, 2006
|
February 1,
2011
|
||
Columbia,
MD
|
March 6,
2002
|
February 1,
2012
|
||
Grand
Prairie, TX
|
September 7,
2001
|
September 7,
2006****
|
||
Allentown,
PA
|
December 9,
2002
|
January 1,
2007***
|
||
Nashville,
TN
|
June
3, 2002
|
May 1,
2007***
|
||
Indianapolis,
IN
|
December 9,
2002
|
November 1,
2007
|
||
New
Britain, CT
|
June
6, 2003
|
January 1,
2008
|
||
Shelton,
CT**
|
September 3,
2004
|
September 1,
2008
|
||
Cromwell,
CT**
|
November 22,
2004
|
November 1,
2011
|
||
Hamden,
CT**
|
March
4, 2003
|
July 1,
2007***
|
||
Queens*
|
June
30, 2006
|
June
30, 2008
|
*
|
Branch
campus of main campus in Union, NJ
|
**
|
Branch
campus of main campus in New Britain,
CT
|
***
|
Currently
going through re-accreditation
|
****
|
Reviewed
at February 2007 ACCSCT Commission
meeting
|
School
|
Last
Accreditation Letter
|
Next
Accreditation
|
||
Brockton,
MA****
|
April 14,
2005
|
December 31,
2008
|
||
Henderson,
NV****
|
April 14,
2005
|
December 31,
2008
|
||
Lincoln,
RI
|
April 14,
2005
|
December 31,
2008
|
||
Lowell,
MA**
|
December 7,
2004
|
December 31,
2008
|
||
Somerville,
MA
|
December 7,
2004
|
December 31,
2008
|
||
Philadelphia
(Center City), PA*
|
April 30,
2003
|
December 31,
2006*****
|
||
Edison,
NJ
|
April 30,
2003
|
December 31,
2006*****
|
||
Marietta,
GA****
|
April 14,
2005
|
December 31,
2008
|
||
Mt.
Laurel, NJ*
|
April 30,
2003
|
December 31,
2006*****
|
||
Norcross,
GA****
|
April 14,
2005
|
December 31,
2008
|
||
Paramus,
NJ*
|
April 30,
2003
|
December 31,
2006*****
|
||
Philadelphia
(Northeast), PA*
|
April 30,
2003
|
December 31,
2006*****
|
||
Plymouth
Meeting, PA*
|
April 30,
2003
|
December 31,
2006*****
|
||
Dayton,
OH
|
April 14,
2006
|
December 31,
2009
|
||
Cincinnati
(Vine Street), OH***
|
April 14,
2006
|
December 31,
2009
|
||
Cincinnati
(Northland Blvd.), OH***
|
April 14,
2006
|
December 31,
2009
|
||
Franklin,
OH***
|
April 14,
2006
|
December 31,
2009
|
||
Florence,
KY***
|
April 14,
2006
|
December 31,
2009
|
||
West
Palm Beach, FL
|
December
11, 2006
|
December
31, 2008
|
||
Summerlin,
NV
|
December
9, 2006
|
October
31, 2007
|
||
Green
Valley, NV
|
December
9, 2006
|
October
31, 2007
|
*
|
Branch
campus of main campus in Edison, NJ
|
**
|
Branch
campus of main campus in Somerville,
MA
|
***
|
Branch
campus of main campus in Dayton, OH
|
****
|
Branch
campus of main campus in Lincoln,
RI
|
*****
|
To
be reviewed at April 2007 commission
meeting
|
Brand
|
Main
Campus (es)
|
Additional
Location (s)
|
||
Lincoln
Technical Institute
|
Union,
NJ
|
Mahwah,
NJ
|
||
Queens,
NY
|
||||
Philadelphia,
PA
|
||||
Columbia,
MD
|
||||
Grand
Prairie, TX
|
||||
Allentown,
PA
|
||||
Edison,
NJ
|
Mount
Laurel, NJ
|
|||
Paramus,
NJ
|
||||
Philadelphia,
PA (Center City)
|
||||
Plymouth
Meeting, PA
|
||||
Northeast
Philadelphia, PA
|
||||
Somerville,
MA
|
Lowell,
MA
|
|||
Brockton,
MA
|
||||
Lincoln,
RI
|
Norcross,
GA*
|
|||
Marietta,
GA*
|
||||
Henderson,
NV*
|
||||
Henderson,
NV (Green Valley)**
|
||||
Las
Vegas, NV (Summerlin)**
|
||||
Lincoln
College of Technology
|
Indianapolis,
IN
|
|||
Melrose
Park, IL
|
||||
Denver,
CO
|
||||
New
Britain, CT
|
Shelton,CT
|
|||
Cromwell,
CT
|
||||
Hamden,
CT
|
||||
West
Palm Beach, FL
|
West
Palm Beach, FL (Culinary)***
|
|||
Nashville
Auto Diesel College
|
Nashville,
TN
|
|||
Southwestern
College of Technology
|
Dayton,
OH
|
Cincinnati,
OH (Vine Street)
|
||
Franklin,
OH
|
||||
Cincinnati,
OH (Northland Blvd.)
|
||||
Florence,
KY
|
*
|
These
campuses are Lincoln College of Technology
brands.
|
**
|
These
campuses are Euphoria Institute of Beauty Arts & Sciences
brands.
|
***
|
This
campus is Florida Culinary Institute brand.
|
Institution
|
2004
|
2003
|
2002
|
|||
Union,
NJ
|
7.60%
|
7.10%
|
5.90%
|
|||
Indianapolis,
IN
|
7.90%
|
7.90%
|
8.41%
|
|||
Philadelphia,
PA
|
12.80%
|
15.40%
|
13.70%
|
|||
Columbia,
MD
|
8.90%
|
8.80%
|
7.10%
|
|||
Allentown,
PA
|
7.00%
|
3.90%
|
7.10%
|
|||
Melrose
Park, IL
|
11.90%
|
9.60%
|
11.90%
|
|||
Grand
Prairie, TX
|
19.50%
|
10.80%
|
14.30%
|
|||
Edison,
NJ
|
3.30%
|
5.00%
|
4.10%
|
|||
Denver,
CO
|
8.40%
|
9.10%
|
8.40%
|
|||
Nashville,
TN
|
3.10%
|
1.80%
|
5.00%
|
|||
Lincoln,
RI
|
10.00%
|
7.40%
|
6.20%
|
|||
Somerville,
MA
|
10.60%
|
8.90%
|
6.20%
|
|||
Southwestern,
OH
|
3.20%
|
6.20%
|
0.00%
|
|||
New
England, CT
|
4.60%
|
1.70%
|
3.90%
|
|||
West
Palm Beach, FL
|
8.20%
|
9.20%
|
10.90%
|
·
|
The
equity ratio, which measures the institution's capital resources,
ability
to borrow and financial viability;
|
·
|
The
primary reserve ratio, which measures the institution's ability to
support
current operations from expendable resources;
and
|
·
|
The
net income ratio, which measures the institution's ability to operate
at a
profit.
|
·
|
Posting
a letter of credit in an amount equal to at least 50% of the total
Title IV Program funds received by the institution during the
institution's most recently completed fiscal
year;
|
·
|
Posting
a letter of credit in an amount equal to at least 10% of such prior
year's
Title IV Program funds, accepting provisional certification,
complying with additional DOE monitoring requirements and agreeing
to
receive Title IV Program funds under an arrangement other than the
DOE's standard advance funding arrangement;
and/or
|
·
|
Complying
with additional DOE monitoring requirements and agreeing to receive
Title IV Program funds under an arrangement other than the DOE's
standard advance funding
arrangement.
|
·
|
Complies
with all applicable federal student financial aid
regulations;
|
·
|
Has
capable and sufficient personnel to administer the federal student
financial aid programs;
|
·
|
Has
acceptable methods of defining and measuring the satisfactory academic
progress of its students;
|
·
|
Refers
to the Office of the Inspector General any credible information indicating
that any applicant, student, employee or agent of the school has
been
engaged in any fraud or other illegal conduct involving Title IV
Programs;
|
·
|
Provides
financial aid counseling to its students;
and
|
·
|
Submits
in a timely manner all reports and financial statements required
by the
regulations.
|
Institution
|
Expiration
Date of Current Program Participation
Agreement
|
|
Allentown,
PA
|
September 30,
2007
|
|
Columbia,
MD
|
September 30,
2007
|
|
Philadelphia,
PA
|
September 30,
2007
|
|
Denver,
CO
|
December 31,
2009
|
|
Lincoln,
RI
|
June 30,
2008
|
|
Nashville,
TN
|
June 30,
2008
|
|
Somerville,
MA
|
June 30,
2008
|
|
Edison,
NJ
|
September 30,
2007
|
|
Union,
NJ
|
September 30,
2007
|
|
Grand
Prairie, TX
|
March 31,
2009
|
|
Indianapolis,
IN
|
March 31,
2009
|
|
Melrose
Park, IL
|
March 31,
2009
|
|
Dayton,
OH
|
June
30, 2008*
|
|
New
Britain, CT
|
March 31,
2009*
|
|
West
Palm Beach, FL
|
June 30,
2010
|
·
|
Any
adverse action, including a probation or similar action, taken against
the
institution by its accrediting
agency;
|
·
|
Any
event that causes the institution, or related entity to realize any
liability that was noted as a contingent liability in the institution's
or
related entity's most recent audit financial
statement;
|
·
|
Any
violation by the institution of any loan
agreement;
|
·
|
Any
failure of the institution to make a payment in accordance with its
debt
obligations that results in a creditor filing suit to recover funds
under
those obligations;
|
·
|
Any
withdrawal of owner's equity from institution by any means, including
declaring a dividend; or
|
·
|
Any
extraordinary losses, as defined in accordance with Accounting Principles
Board Opinion No. 30.
|
Item
1A.
|
RISK
FACTORS
|
·
|
Comply
with all applicable Title IV
regulations;
|
·
|
Have
capable and sufficient personnel to administer Title IV
Programs;
|
·
|
Have
acceptable methods of defining and measuring the satisfactory academic
progress of its students;
|
·
|
Provide
financial aid counseling to its students;
and
|
·
|
Submit
in a timely manner all reports and financial statements required
by the
regulations.
|
·
|
Require
the repayment of Title IV
funds;
|
·
|
Impose
a less favorable payment system for the institution's receipt of
Title IV funds;
|
·
|
Place
the institution on provisional certification status;
or
|
·
|
Commence
a proceeding to impose a fine or to limit, suspend or terminate the
participation of the institution in Title IV
Programs.
|
·
|
Student
dissatisfaction with our programs and
services;
|
·
|
Diminished
access to high school student
populations;
|
·
|
Our
failure to maintain or expand our brand or other factors related
to our
marketing or advertising practices;
and
|
·
|
Our
inability to maintain relationships with automotive, diesel, healthcare,
skilled trades and IT, and spa and culinary manufacturers and
suppliers.
|
·
|
authorize
the issuance of blank check preferred stock that could be issued
by our
board of directors to thwart a takeover
attempt;
|
·
|
prohibit
cumulative voting in the election of directors, which would otherwise
allow holders of less than a majority of stock to elect some
directors;
|
·
|
require
super-majority voting to effect amendments to certain provisions
of our
amended and restated certificate of
incorporation;
|
·
|
limit
who may call special meetings of both the board of directors and
stockholders;
|
·
|
prohibit
stockholder action by non-unanimous written consent and otherwise
require
all stockholder actions to be taken at a meeting of the
stockholders;
|
·
|
establish
advance notice requirements for nominating candidates for election
to the
board of directors or for proposing matters that can be acted upon
by
stockholders at stockholders' meetings;
and
|
·
|
require
that vacancies on the board of directors, including newly created
directorships, be filled only by a majority vote of directors then
in
office.
|
ITEM
1B.
|
UNRESOLVED
STAFF
COMMENTS
|
ITEM
2.
|
PROPERTIES
|
Location
|
Brand
|
Approximate
Square Footage
|
||
Union,
New Jersey
|
Lincoln
Technical Institute
|
56,000
|
||
Mahwah,
New Jersey
|
Lincoln
Technical Institute
|
79,000
|
||
Allentown,
Pennsylvania
|
Lincoln
Technical Institute
|
26,000
|
||
Philadelphia,
Pennsylvania
|
Lincoln
Technical Institute
|
30,000
|
||
Columbia,
Maryland
|
Lincoln
Technical Institute
|
110,000
|
||
Grand
Prairie, Texas
|
Lincoln
Technical Institute
|
146,000
|
||
Queens,
New York
|
Lincoln
Technical Institute
|
48,000
|
||
Edison,
New Jersey
|
Lincoln
Technical Institute
|
64,000
|
||
Mt.
Laurel, New Jersey
|
Lincoln
Technical Institute
|
26,000
|
||
Philadelphia,
Pennsylvania
|
Lincoln
Technical Institute
|
29,000
|
||
Northeast
Philadelphia, Pennsylvania
|
Lincoln
Technical Institute
|
25,000
|
||
Plymouth
Meeting, Pennsylvania
|
Lincoln
Technical Institute
|
30,000
|
||
Paramus,
New Jersey
|
Lincoln
Technical Institute
|
27,000
|
||
Brockton,
Massachusetts
|
Lincoln
Technical Institute
|
10,000
|
||
Lincoln,
Rhode Island
|
Lincoln
Technical Institute
|
40,000
|
||
Lowell,
Massachusetts
|
Lincoln
Technical Institute
|
20,000
|
||
Somerville,
Massachusetts
|
Lincoln
Technical Institute
|
33,000
|
||
New
Britain, Connecticut
|
Lincoln
Technical Institute
|
51,000
|
||
Cromwell,
Connecticut
|
Lincoln
Technical Institute
|
12,000
|
||
Hamden,
Connecticut
|
Lincoln
Technical Institute
|
14,000
|
||
Shelton,
Connecticut
|
Lincoln
Technical Institute
|
41,600
|
||
Indianapolis,
Indiana
|
Lincoln
College of Technology
|
126,000
|
||
Melrose
Park, Illinois
|
Lincoln
College of Technology
|
67,000
|
||
Denver,
Colorado
|
Lincoln
College of Technology
|
78,000
|
||
Norcross,
Georgia
|
Lincoln
College of Technology
|
27,000
|
||
Marietta,
Georgia
|
Lincoln
College of Technology
|
30,000
|
||
Henderson,
Nevada
|
Lincoln
College of Technology
|
27,000
|
||
West
Palm Beach, Florida
|
Lincoln
College of Technology and Florida Culinary Institute
|
117,000
|
||
Nashville,
Tennessee
|
Nashville
Auto-Diesel College
|
278,000
|
||
Dayton,
Ohio
|
Southwestern
College
|
9,000
|
||
Franklin,
Ohio
|
Southwestern
College
|
14,000
|
||
Cincinnati,
Ohio
|
Southwestern
College
|
10,000
|
||
Cincinnati
(Tri-County), Ohio
|
Southwestern
College
|
25,000
|
||
Florence,
Kentucky
|
Southwestern
College
|
11,000
|
||
Las
Vegas, Nevada
|
Euphoria
Institute
|
13,000
|
||
Henderson,
Nevada
|
Euphoria
Institute
|
20,000
|
||
West
Orange, New Jersey
|
Corporate
Offices
|
41,000
|
ITEM
3.
|
LEGAL
PROCEEDINGS
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY
HOLDERS
|
ITEM
5.
|
MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED
STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
|
Price
Range of Common Stock
|
|||||||
High
|
Low
|
||||||
Fiscal
Year Ended December 31, 2006:
|
|||||||
First
Quarter
|
$
|
17.28
|
$
|
14.25
|
|||
Second
Quarter
|
$
|
17.09
|
$
|
15.42
|
|||
Third
Quarter
|
$
|
18.25
|
$
|
16.33
|
|||
Fourth
Quarter
|
$
|
17.06
|
$
|
12.14
|
Price
Range of Common Stock
|
|||||||
High
|
Low
|
||||||
Fiscal
Year Ended December 31, 2005:
|
|||||||
First
Quarter
|
$
|
-
|
$
|
-
|
|||
Second
Quarter
|
$
|
20.25
|
$
|
19.11
|
|||
Third
Quarter
|
$
|
21.00
|
$
|
11.67
|
|||
Fourth
Quarter
|
$
|
15.01
|
$
|
11.80
|
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
|
|||||||
Equity
compensation plans approved by security holders
|
1,728,225
|
$
|
8.85
|
1,015,450
|
||||||
Equity
compensation plans not approved by security holders
|
-
|
$
|
-
|
-
|
||||||
Total
|
1,728,225
|
$
|
8.85
|
1,015,450
|
ITEM
6.
|
SELECTED
FINANCIAL
DATA
|
Year
Ended December 31,
|
||||||||||||||||
2006
|
2005
|
2004
|
2003
|
2002
|
||||||||||||
(In
thousands, except per share amounts)
|
||||||||||||||||
Statement
of Operations Data:
|
||||||||||||||||
Revenues
|
$
|
321,506
|
$
|
299,221
|
$
|
261,233
|
$
|
198,574
|
$
|
139,201
|
||||||
Cost
and expenses:
|
||||||||||||||||
Educational
services and facilities (1)
|
136,631
|
121,524
|
104,843
|
85,201
|
66,580
|
|||||||||||
Selling,
general and administrative (2)
|
157,309
|
145,194
|
130,941
|
97,714
|
71,753
|
|||||||||||
(Gain)
loss on sale of assets
|
(435
|
)
|
(7
|
)
|
368
|
(22
|
)
|
(1,082
|
)
|
|||||||
Total
costs & expenses
|
293,505
|
266,711
|
236,152
|
182,893
|
137,251
|
|||||||||||
Operating
income
|
28,001
|
32,510
|
25,081
|
15,681
|
1,950
|
|||||||||||
Other:
|
||||||||||||||||
Gain
on sale of securities
|
-
|
-
|
-
|
211
|
-
|
|||||||||||
Interest
income
|
981
|
775
|
104
|
133
|
212
|
|||||||||||
Interest
expense (3)
|
(2,291
|
)
|
(2,892
|
)
|
(3,007
|
)
|
(2,758
|
)
|
(2,937
|
)
|
||||||
Other
(loss) income
|
(132
|
)
|
243
|
42
|
307
|
-
|
||||||||||
Income
(loss) before income taxes
|
26,559
|
30,636
|
22,220
|
13,574
|
(775
|
)
|
||||||||||
Provision
(benefit) for income taxes
|
11,007
|
11,927
|
9,242
|
5,355
|
(101
|
)
|
||||||||||
Net
income (loss)
|
$
|
15,552
|
$
|
18,709
|
$
|
12,978
|
$
|
8,219
|
$
|
(674
|
)
|
|||||
Earnings
per share - basic:
|
||||||||||||||||
Net
income (loss) available to common stockholders
|
$
|
0.61
|
$
|
0.80
|
$
|
0.60
|
$
|
0.38
|
$
|
(0.03
|
)
|
|||||
Earnings
per share - diluted:
|
||||||||||||||||
Net
income (loss) available to common stockholders
|
$
|
0.60
|
$
|
0.76
|
$
|
0.56
|
$
|
0.37
|
$
|
(0.03
|
)
|
|||||
Weighted
average number of common shares outstanding:
|
||||||||||||||||
Basic
|
25,336
|
23,475
|
21,676
|
21,667
|
21,662
|
|||||||||||
Diluted
|
26,086
|
24,503
|
23,095
|
22,364
|
21,662
|
|||||||||||
Other
Data:
|
||||||||||||||||
Capital
expenditures
|
$
|
19,341
|
$
|
22,621
|
$
|
23,813
|
$
|
13,154
|
$
|
3,598
|
||||||
Depreciation
and amortization
|
14,866
|
13,064
|
10,749
|
9,879
|
7,201
|
|||||||||||
Number
of campuses
|
37
|
34
|
28
|
23
|
23
|
|||||||||||
Average
student population
|
18,081
|
17,869
|
16,266
|
12,487
|
9,155
|
|||||||||||
Balance
Sheet Data:
|
||||||||||||||||
Cash
and cash equivalents
|
$
|
6,461
|
$
|
50,257
|
$
|
41,445
|
$
|
48,965
|
$
|
11,079
|
||||||
Working
(deficit) capital (4)
|
(20,943
|
)
|
8,531
|
4,570
|
13,402
|
(11,287
|
)
|
|||||||||
Total
assets
|
226,216
|
214,792
|
162,729
|
139,355
|
92,562
|
|||||||||||
Total
debt (5)
|
9,860
|
10,768
|
46,829
|
43,060
|
22,682
|
|||||||||||
Total
stockholders' equity
|
151,783
|
135,990
|
58,086
|
42,924
|
33,905
|
ITEM
7.
|
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
|
·
|
Major
components of educational services and facilities expenses include
faculty
compensation and benefits, expenses of books and tools, facility
rent,
maintenance, utilities, depreciation and amortization of property
and
equipment used in the provision of education services and other costs
directly associated with teaching our programs and providing educational
services to our students.
|
·
|
Selling,
general and administrative expenses include compensation and benefits
of
employees who are not directly associated with the provision of
educational services (such as executive management and school management,
finance and central accounting, legal, human resources and business
development), marketing and student enrollment expenses (including
compensation and benefits of personnel employed in sales and marketing
and
student admissions), costs to develop curriculum, costs of professional
services, bad debt expense, rent for our corporate headquarters,
depreciation and amortization of property and equipment that is not
used
in the provision of educational services and other costs that are
incidental to our operations. All marketing and student enrollment
expenses are recognized in the period incurred.
|
Year
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Revenues
|
100.0
|
%
|
100.0
|
%
|
100.0
|
%
|
||||
Costs
and expenses:
|
||||||||||
Educational
services and facilities
|
42.5
|
40.6
|
40.1
|
|||||||
Selling,
general and administrative
|
48.9
|
48.5
|
50.1
|
|||||||
(Gain)
loss on sale of assets
|
(0.1
|
)
|
0.0
|
0.2
|
||||||
Total
costs and expenses
|
91.3
|
89.1
|
90.4
|
|||||||
Operating
income
|
8.7
|
10.9
|
9.6
|
|||||||
Interest
expense, net
|
(0.4
|
)
|
(0.8
|
)
|
(1.1
|
)
|
||||
Other
Income
|
0.0
|
0.1
|
0.0
|
|||||||
Income
before income taxes
|
8.3
|
10.1
|
8.5
|
|||||||
Provision
for income taxes
|
3.4
|
3.9
|
3.5
|
|||||||
Net
income
|
4.8
|
%
|
6.3
|
%
|
5.0
|
%
|
Year
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
(In
thousands)
|
||||||||||
Net
cash provided by operating activities
|
$
|
15,258
|
$
|
38,966
|
$
|
26,674
|
||||
Net
cash used in investing activities
|
$
|
(52,160
|
)
|
$
|
(50,397
|
)
|
$
|
(38,311
|
)
|
|
Net
cash (used in) provided by financing activities
|
$
|
(6,894
|
)
|
$
|
20,243
|
$
|
4,117
|
As
of December 31,
|
|||||||
2006
|
2005
|
||||||
Credit
agreement
|
$
|
-
|
$
|
-
|
|||
Finance
obligation
|
9,672
|
9,672
|
|||||
Automobile
loans
|
37
|
81
|
|||||
Capital
leases-computers (with rates ranging from 6.7% to 10.7%)
|
151
|
1,015
|
|||||
Subtotal
|
9,860
|
10,768
|
|||||
Less
current portion
|
(91
|
)
|
(283
|
)
|
|||
Total
long-term debt
|
$
|
9,769
|
$
|
10,485
|
Payments
Due by Period
|
||||||||||||||||
Total
|
Less
than 1 year
|
2-3
years
|
4-5
years
|
After
5 years
|
||||||||||||
Capital
leases (including interest)
|
$
|
165
|
$
|
79
|
$
|
86
|
$
|
-
|
$
|
-
|
||||||
Operating
leases
|
148,413
|
17,085
|
30,390
|
24,486
|
76,452
|
|||||||||||
Rent
on finance obligation
|
13,454
|
1,334
|
2,668
|
2,668
|
6,784
|
|||||||||||
Automobile
loans (including interest)
|
38
|
22
|
16
|
-
|
-
|
|||||||||||
Total
contractual cash obligations
|
$
|
162,070
|
$
|
18,520
|
$
|
33,160
|
$
|
27,154
|
$
|
83,236
|
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY
DATA
|
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
ITEM
9A.
|
DISCLOSURE
CONTROLS AND
PROCEDURES
|
ITEM
9B.
|
OTHER
INFORMATION
|
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE
|
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER
MATTERS
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED
TRANSACTIONS
AND DIRECTOR
INDEPENDENCE
|
ITEM
14.
|
PRINCIPAL
ACCOUNTING FEES AND
SERVICES
|
ITEM
15.
|
EXHIBITS
AND FINANCIAL STATEMENT
SCHEDULE
|
1.
|
Financial
Statements
|
2.
|
Financial
Statement Schedule
|
3.
|
Exhibits
Required by Securities and Exchange Commission Regulation S-K
|
Exhibit
Number
|
Description
|
|
3.1
|
Amended
and Restated Certificate of Incorporation of the Company
(1).
|
|
3.2
|
Amended
and Restated By-laws of the Company (2).
|
|
4.1
|
Stockholders’
Agreement, dated as of September 15, 1999, among Lincoln Technical
Institute, Inc., Back to School Acquisition, L.L.C., and Five Mile
River
Capital Partners LLC. (1).
|
|
4.2
|
Letter
agreement, dated August 9, 2000, by Back to School Acquisition, L.L.C.,
amending the Stockholders’ Agreement (1).
|
|
4.3
|
Letter
agreement, dated August 9, 2000, by Lincoln Technical Institute,
Inc.,
amending the Stockholders’ Agreement (1).
|
|
4.4
|
Management
Stockholders Agreement, dated as of January 1, 2002, by and among
Lincoln
Technical Institute, Inc., Back to School Acquisition, L.L.C. and
the
Stockholders and other holders of options under the Management Stock
Option Plan listed therein (1).
|
|
4.5
|
Registration
Rights Agreement between the Company and Back to School Acquisition,
L.L.C. (2).
|
|
4.6
|
Specimen
Stock Certificate evidencing shares of common stock
(1).
|
|
10.1
|
Credit
Agreement, dated as of February 15, 2005, among the Company, the
Guarantors from time to time parties thereto, the Lenders from time
to
time parties thereto and Harris Trust and Savings Bank, as Administrative
Agent (1).
|
|
10.2
*
|
Amended
and Restated Employment Agreement, dated as of February 1, 2007,
between
the Company and David F. Carney.
|
|
10.3
*
|
Amended
and Restated Employment Agreement, dated as of February 1, 2007,
between
the Company and Lawrence E. Brown.
|
|
10.4
*
|
Amended
and Restated Employment Agreement, dated as of February 1, 2007,
between
the Company and Scott M. Shaw.
|
|
10.5
*
|
Amended
and Restated Employment Agreement, dated as of February 1, 2007,
between
the Company and Cesar Ribeiro.
|
10.6
*
|
Amended
and Restated Employment Agreement, dated as of February 1, 2007,
between
the Company and Shaun E. McAlmont.
|
|
10.7
|
Lincoln
Educational Services Corporation 2005 Long Term Incentive Plan
(1).
|
|
10.8
|
Lincoln
Educational Services Corporation 2005 Non Employee Directors Restricted
Stock Plan (1).
|
|
10.9
|
Lincoln
Educational Services Corporation 2005 Deferred Compensation Plan
(1).
|
|
10.10
|
Lincoln
Technical Institute Management Stock Option Plan, effective January
1,
2002 (1).
|
|
10.11
|
Form
of Stock Option Agreement, dated January 1, 2002, between Lincoln
Technical Institute, Inc. and certain participants (1).
|
|
10.12
|
Management
Stock Subscription Agreement, dated January 1, 2002, among Lincoln
Technical Institute, Inc. and certain management investors
(1).
|
|
10.13
|
Stockholder’s
Agreement among Lincoln Educational Services Corporation, Back to
School
Acquisition L.L.C., Steven W. Hart and Steven W. Hart 2003 Grantor
Retained Annuity Trust (2).
|
|
10.14
|
Stock
Purchase Agreement, dated as of March 30, 2006, among Lincoln Technical
Institute, Inc., and Richard I. Gouse, Andrew T. Gouse, individually
and
as Trustee of the Carolyn Beth Gouse Irrevocable Trust, Seth A. Kurn
and
Steven L. Meltzer (3).
|
|
21.1
*
|
Subsidiaries
of the Company.
|
|
23
*
|
Consent
of Independent Registered Public Accounting Firm.
|
|
31.1
*
|
Certification
of Chairman & Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
31.2
*
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
32
*
|
Certification
of Chairman & Chief Executive Officer and Chief Financial Officer
pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of
the
Sarbanes-Oxley Act of 2002.
|
(1)
|
Incorporated
by reference to the Company’s Registration Statement on Form S-1
(Registration No. 333-123664).
|
(2)
|
Incorporated
by reference to the Company’s Form 8-K dated June 28, 2005.
|
(3)
|
Incorporated
by reference to the Company’s Form 10-Q for the quarterly period ended
March 31, 2006.
|
*
|
Filed
herewith.
|
LINCOLN
EDUCATIONAL SERVICES CORPORATION
|
||
By:
|
/s/
Cesar Ribeiro
|
|
Cesar
Ribeiro
|
||
Senior
Vice President, Chief Financial Officer and Treasurer
|
||
(Principal
Accounting and Financial Officer)
|
Signature
|
Title
|
Date
|
||
/s/
David F. Carney
|
Chief
Executive Officer
|
|||
David
F. Carney
|
and
Chairman of the Board
|
March
16, 2007
|
||
/s/
Cesar Ribeiro
|
Senior
Vice President,
|
|
||
Cesar
Ribeiro
|
Chief
Financial Officer and Treasurer (Principal Accounting and Financial
Officer)
|
March
16, 2007
|
||
/s/
Peter S. Burgess
|
Director
|
|||
Peter
S. Burgess
|
March
16, 2007
|
|||
|
||||
/s/
James J. Burke, Jr.
|
Director
|
|||
.James
J. Burke, Jr.
|
March
16, 2007
|
|||
|
||||
/s/
Celia Currin
|
Director
|
|||
Celia
Currin
|
March
16, 2007
|
|||
/s/
Paul E. Glaske
|
Director
|
|||
Paul
E. Glaske
|
March
16, 2007
|
|||
/s/
Steven W. Hart
|
Director
|
|||
Steven
W. Hart
|
March
16, 2007
|
|||
/s/
Alexis P. Michas
|
Director
|
|||
Alexis
P. Michas
|
March
16, 2007
|
|||
/s/
J. Barry Morrow
|
Director
|
|||
J.
Barry Morrow
|
March
16, 2007
|
|||
/s/
Jerry G. Rubenstein
|
Director
|
|||
Jerry
G. Rubenstein
|
March
16, 2007
|
Page
Number
|
||
Management’s
Report on Internal Control over Financial Reporting
|
F-2
|
|
Reports
of Independent Registered Public Accounting Firm
|
F-3
|
|
Consolidated
Balance Sheets at December 31, 2006 and 2005
|
F-5
|
|
Consolidated
Statements of Income for the years ended December 31, 2006, 2005
and
2004
|
F-7
|
|
Consolidated
Statements of Changes in Stockholders' Equity for the years ended
December
31, 2006, 2005 and 2004
|
F-8
|
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2006, 2005
and
2004
|
F-9
|
|
Notes
to Consolidated Financial Statements
|
F-11
|
|
Item
15
|
||
Schedule
II-Valuation and Qualifying Accounts
|
F-33
|
/s/
David F. Carney
|
|
David
F. Carney
|
|
Chairman
& Chief Executive Officer
|
|
March
16, 2007
|
|
/s/
Cesar Ribeiro
|
|
Cesar
Ribeiro
|
|
Chief
Financial Officer
|
|
March
16, 2007
|
December
31,
|
|||||||
2006
|
2005
|
||||||
ASSETS
|
|||||||
CURRENT
ASSETS:
|
|||||||
Cash
and cash equivalents
|
$
|
6,461
|
$
|
50,257
|
|||
Restricted
cash
|
920
|
-
|
|||||
Accounts
receivable, less allowance of $11,456 and $7,563 at December 31,
2006
and
December 31, 2005, respectively
|
20,473
|
13,452
|
|||||
Inventories
|
2,438 | 1,764 | |||||
Deferred
income taxes
|
4,827
|
3,545
|
|||||
Prepaid
expenses and other current assets
|
3,049
|
2,934
|
|||||
Other
receivable
|
-
|
452
|
|||||
Total
current assets
|
38,168
|
72,404
|
|||||
PROPERTY,
EQUIPMENT AND FACILITIES - At cost, net of accumulated depreciation
and
amortization of $72,870 and $59,570 at December 31, 2006 and December
31,
2005, respectively
|
94,368
|
68,932
|
|||||
OTHER
ASSETS:
|
|||||||
Deferred
finance charges
|
1,019
|
1,211
|
|||||
Pension
plan assets, net
|
1,107
|
5,071
|
|||||
Deferred
income taxes, net
|
2,688
|
2,790
|
|||||
Goodwill
|
84,995
|
59,467
|
|||||
Noncurrent
accounts receivable, less allowance of $80 and $84 at December 31,
2006
and December 31, 2005, respectively
|
723
|
754
|
|||||
Other
assets
|
3,148
|
4,163
|
|||||
Total
other assets
|
93,680
|
73,456
|
|||||
TOTAL
|
$
|
226,216
|
$
|
214,792
|
December
31,
|
|||||||
2006
|
2005
|
||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|||||||
CURRENT
LIABILITIES:
|
|||||||
Current
portion of long-term debt and lease obligations
|
$
|
91
|
$
|
283
|
|||
Unearned
tuition
|
33,150
|
34,930
|
|||||
Accounts
payable
|
12,118
|
12,675
|
|||||
Accrued
expenses
|
10,335
|
11,060
|
|||||
Advance
payments of federal funds
|
557
|
840
|
|||||
Income
taxes payable
|
2,860
|
4,085
|
|||||
Total
current liabilities
|
59,111
|
63,873
|
|||||
NONCURRENT
LIABILITIES:
|
|||||||
Long-term
debt and lease obligations, net of current portion
|
9,769
|
10,485
|
|||||
Other
long-term liabilities
|
5,553
|
4,444
|
|||||
Total
liabilities
|
74,433
|
78,802
|
|||||
COMMITMENTS
AND CONTINGENCIES
|
|||||||
STOCKHOLDERS'
EQUITY:
|
|||||||
Preferred
stock, no par value - 10,000,000 shares authorized, no shares issued
and
outstanding at December 31, 2006 and 2005
|
-
|
-
|
|||||
Common
stock, no par value - authorized 100,000,000 shares at December 31,
2006
and 2005, issued and outstanding 25,450,695 shares at December 31,
2006
and 25,168,390 shares at December 31, 2005
|
120,182
|
119,453
|
|||||
Additional
paid-in capital
|
7,695
|
5,665
|
|||||
Deferred
compensation
|
(467
|
)
|
(360
|
)
|
|||
Retained
earnings
|
26,784
|
11,232
|
|||||
Accumulated
other comprehensive loss
|
(2,411
|
)
|
-
|
||||
Total
stockholders' equity
|
151,783
|
135,990
|
|||||
TOTAL
|
$
|
226,216
|
$
|
214,792
|
Year
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
REVENUES
|
$
|
321,506
|
$
|
299,221
|
$
|
261,233
|
||||
COSTS
AND EXPENSES:
|
||||||||||
Educational
services and facilities
|
136,631
|
121,524
|
104,843
|
|||||||
Selling,
general and administrative
|
157,309
|
145,194
|
130,941
|
|||||||
(Gain)
loss on sale of assets
|
(435
|
)
|
(7
|
)
|
368
|
|||||
Total
costs & expenses
|
293,505
|
266,711
|
236,152
|
|||||||
OPERATING
INCOME
|
28,001
|
32,510
|
25,081
|
|||||||
OTHER:
|
||||||||||
Interest
income
|
981
|
775
|
104
|
|||||||
Interest
expense
|
(2,291
|
)
|
(2,892
|
)
|
(3,007
|
)
|
||||
Other
(loss) income
|
(132
|
)
|
243
|
42
|
||||||
INCOME
BEFORE INCOME TAXES
|
26,559
|
30,636
|
22,220
|
|||||||
PROVISION
FOR INCOME TAXES
|
11,007
|
11,927
|
9,242
|
|||||||
NET
INCOME
|
$
|
15,552
|
$
|
18,709
|
$
|
12,978
|
||||
Earnings per share - basic: | ||||||||||
Net
income available to common stockholders
|
$
|
0.61
|
$
|
0.80
|
$
|
0.60
|
||||
Earnings per share - diluted: | ||||||||||
Net
income available to common stockholders
|
$
|
0.60
|
$
|
0.76
|
$
|
0.56
|
||||
Weighted
average number of common shares outstanding:
|
||||||||||
Basic
|
25,336
|
23,475
|
21,676
|
|||||||
Diluted
|
26,086
|
24,503
|
23,095
|
Loan
|
Accumulated
|
Retained
|
|||||||||||||||||||||||
Additional
|
Receivable
|
Other
|
Earnings
|
||||||||||||||||||||||
Common
Stock
|
Paid-in
|
Deferred
|
From
|
Comprehensive
|
(Accumulated
|
||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Compensation
|
Stockholders
|
Loss
|
Deficit)
|
Total
|
||||||||||||||||||
BALANCE
- December 31, 2003
|
21,668
|
$
|
62,385
|
$
|
1426
|
$
|
-
|
$
|
(432
|
)
|
$
|
-
|
$
|
(20,455
|
)
|
$
|
42,924
|
||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
-
|
12,978
|
12,978
|
|||||||||||||||||
Stock-based
compensation expense
|
-
|
-
|
1,793
|
-
|
-
|
-
|
-
|
1,793
|
|||||||||||||||||
Stockholders
loan repayment
|
-
|
-
|
-
|
-
|
251
|
-
|
-
|
251
|
|||||||||||||||||
Tax
benefit of options exercised
|
-
|
-
|
43
|
-
|
-
|
-
|
-
|
43
|
|||||||||||||||||
Exercise
of stock options
|
31
|
97
|
-
|
-
|
-
|
-
|
-
|
97
|
|||||||||||||||||
BALANCE
- December 31, 2004
|
21,699
|
62,482
|
3,262
|
-
|
(181
|
)
|
-
|
(7,477
|
)
|
58,086
|
|||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
-
|
18,709
|
18,709
|
|||||||||||||||||
Issuance
of common stock, net of issuance expenses
|
3,177
|
56,255
|
-
|
-
|
-
|
-
|
-
|
56,255
|
|||||||||||||||||
Issuance
of restricted stock and amortization of deferred
compensation
|
21
|
-
|
420
|
(360
|
)
|
-
|
-
|
-
|
60
|
||||||||||||||||
Stock-based
compensation expense
|
-
|
-
|
1,286
|
-
|
-
|
-
|
-
|
1,286
|
|||||||||||||||||
Stockholders
loan repayment
|
-
|
-
|
-
|
-
|
181
|
-
|
-
|
181
|
|||||||||||||||||
Tax
benefit of options exercised
|
-
|
-
|
697
|
-
|
-
|
-
|
-
|
697
|
|||||||||||||||||
Exercise
of stock options
|
271
|
716
|
|
-
|
-
|
-
|
-
|
716
|
|||||||||||||||||
BALANCE
- December 31, 2005
|
25,168
|
119,453
|
5,665
|
(360
|
)
|
-
|
-
|
11,232
|
135,990
|
||||||||||||||||
Net
income
|
-
|
-
|
-
|
-
|
-
|
-
|
15,552
|
15,552
|
|||||||||||||||||
Reduction
in estimated stock issuance expenses
|
-
|
150
|
-
|
-
|
-
|
-
|
-
|
150
|
|||||||||||||||||
Issuance
of restricted stock and amortization of deferred
compensation
|
19
|
-
|
300
|
(107
|
)
|
-
|
-
|
-
|
193
|
||||||||||||||||
Stock-based
compensation expense
|
-
|
-
|
1,231
|
-
|
-
|
-
|
-
|
1,231
|
|||||||||||||||||
Tax
benefit of options exercised
|
-
|
-
|
499
|
-
|
-
|
-
|
-
|
499
|
|||||||||||||||||
Exercise
of stock options
|
264
|
579
|
-
|
-
|
-
|
-
|
-
|
579
|
|||||||||||||||||
Initial
adoption of SFAS No. 158,net of taxes
|
-
|
-
|
-
|
-
|
-
|
(2,411
|
)
|
-
|
(2,411
|
)
|
|||||||||||||||
BALANCE
- December 31, 2006
|
25,451
|
$
|
120,182
|
$
|
7,695
|
$
|
(467
|
)
|
$
|
-
|
$
|
(2,411
|
)
|
$
|
26,784
|
$
|
151,783
|
Year
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||||
Net
income
|
$
|
15,552
|
$
|
18,709
|
$
|
12,978
|
||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||||
Depreciation
and amortization
|
14,866
|
13,064
|
10,749
|
|||||||
Amortization
of deferred finance charges
|
192
|
215
|
375
|
|||||||
Write-off
of deferred finance costs
|
-
|
365
|
-
|
|||||||
Deferred
income taxes
|
(3,655
|
)
|
340
|
(329
|
)
|
|||||
Fixed
asset donations
|
(22
|
)
|
(243
|
)
|
-
|
|||||
Loss
(gain) on disposal of assets
|
(437
|
)
|
(7
|
)
|
368
|
|||||
Provision
for doubtful accounts
|
15,590
|
11,188
|
9,247
|
|||||||
Stock-based
compensation expense
|
1,424
|
1,346
|
1,793
|
|||||||
Tax
benefit associated with exercise of stock options
|
-
|
697
|
43
|
|||||||
Deferred
rent
|
1,081
|
1,670
|
1,602
|
|||||||
(Increase)
decrease in assets, net of acquisitions:
|
||||||||||
Accounts
receivable
|
(21,870
|
)
|
(11,676
|
)
|
(11,091
|
)
|
||||
Inventories
|
(587
|
)
|
(65
|
)
|
(577
|
)
|
||||
Prepaid
expenses and current assets
|
(374
|
)
|
(300
|
)
|
(400
|
)
|
||||
Other
assets
|
1,181
|
54
|
(830
|
)
|
||||||
Increase
(decrease) in liabilities, net of acquisitions:
|
||||||||||
Accounts
payable
|
(1,441
|
)
|
1,801
|
1,547
|
||||||
Other
liabilities
|
(157
|
)
|
(468
|
)
|
(229
|
)
|
||||
Income
taxes payable/prepaid
|
(1,225
|
)
|
4,068
|
(3,839
|
)
|
|||||
Accrued
expenses
|
(870
|
)
|
(1,715
|
)
|
331
|
|||||
Unearned
tuition
|
(3,990
|
)
|
(77
|
)
|
4,936
|
|||||
Total
adjustments
|
(294
|
)
|
20,257
|
13,696
|
||||||
Net
cash provided by operating activities
|
15,258
|
38,966
|
26,674
|
|||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|||||||
Restricted
cash
|
(920
|
)
|
-
|
-
|
||||||
Capital
expenditures
|
(19,341
|
)
|
(22,621
|
)
|
(23,813
|
)
|
||||
Proceeds
from sale of property and equipment
|
973
|
-
|
-
|
|||||||
Acquisitions,
net of cash acquired
|
(32,872
|
)
|
(27,776
|
)
|
(14,498
|
)
|
||||
Net
cash used in investing activities
|
(52,160
|
)
|
(50,397
|
)
|
(38,311
|
)
|
Year
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|||||||
Proceeds
from borrowings
|
14,000
|
31,000
|
25,290
|
|||||||
Payments
on borrowings
|
(21,214
|
)
|
(66,750
|
)
|
(21,000
|
)
|
||||
Proceeds
from finance obligation
|
-
|
-
|
169
|
|||||||
Payments
of deferred finance fees
|
-
|
(848
|
)
|
-
|
||||||
Proceeds
from exercise of stock options
|
579
|
716
|
97
|
|||||||
Tax
benefit associated with exercise of stock options
|
499
|
-
|
-
|
|||||||
Principal
payments under capital lease obligations
|
(908
|
)
|
(311
|
)
|
(690
|
)
|
||||
Repayment
from shareholder loans
|
-
|
181
|
251
|
|||||||
Proceeds
from issuance of common stock, net of issuance costs of
$2,845
|
150
|
56,255
|
-
|
|||||||
Net
cash (used in) provided by financing activities
|
(6,894
|
)
|
20,243
|
4,117
|
||||||
NET
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
|
(43,796
|
)
|
8,812
|
(7,520
|
)
|
|||||
CASH
AND CASH EQUIVALENTS—Beginning of year
|
50,257
|
41,445
|
48,965
|
|||||||
CASH
AND CASH EQUIVALENTS—End of year
|
$
|
6,461
|
$
|
50,257
|
$
|
41,445
|
||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
||||||||||
Cash
paid during the year for:
|
||||||||||
Interest
|
$
|
2,243
|
$
|
2,358
|
$
|
2,780
|
||||
Income
taxes
|
$
|
15,799
|
$
|
11,025
|
$
|
13,382
|
||||
SUPPLEMENTAL
SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||||
Cash
paid during the period for:
|
||||||||||
Fair
value of assets acquired
|
$
|
47,511
|
$
|
32,335
|
$
|
14,593
|
||||
Net
cash paid for the acquisitions
|
(32,872
|
)
|
(27,776
|
)
|
(14,498
|
)
|
||||
Liabilities
assumed
|
$
|
14,639
|
$
|
4,559
|
$
|
95
|
1.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
2.
|
RECENT
ACCOUNTING PRONOUNCEMENTS
|
3.
|
FINANCIAL
AID AND REGULATORY
COMPLIANCE
|
4.
|
WEIGHTED
AVERAGE COMMON SHARES
|
Year
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Basic
shares outstanding
|
25,336
|
23,475
|
21,676
|
|||||||
Dilutive
effect of stock options
|
750
|
1,028
|
1,419
|
|||||||
Diluted
shares outstanding
|
26,086
|
24,503
|
23,095
|
5.
|
BUSINESS
ACQUISITIONS
|
FLA
May 22, 2006
|
EUP
December 1, 2005
|
NETI
January 11, 2005
|
SWC
January 23, 2004
|
||||||||||
Property,
equipment and facilities
|
$
|
20,609
|
$
|
793
|
$
|
1,000
|
$
|
890
|
|||||
Goodwill
|
24,710
|
9,019
|
18,464
|
12,826
|
|||||||||
Identified
intangibles:
|
|||||||||||||
Student
contracts
|
350
|
130
|
770
|
280
|
|||||||||
Trade
name
|
280
|
180
|
600
|
330
|
|||||||||
Curriculum
|
-
|
-
|
700
|
-
|
|||||||||
Non-compete
|
200
|
-
|
-
|
-
|
|||||||||
Other
assets
|
450
|
-
|
-
|
-
|
|||||||||
Current
assets, excluding cash acquired
|
912
|
125
|
782
|
267
|
|||||||||
Total
liabilities assumed
|
(14,639
|
)
|
(998
|
)
|
(3,561
|
)
|
(95
|
)
|
|||||
Cost
of acquisition, net of cash acquired
|
$
|
32,872
|
$
|
9,249
|
$
|
18,755
|
$
|
14,498
|
Year
ended December 31, 2006
|
||||||||||
Historical
2006
|
Pro
forma impact FLA 2006
|
Pro
forma 2006
|
||||||||
Revenue
|
$
|
321,506
|
$
|
7,148
|
$
|
328,654
|
||||
Net
income
|
$
|
15,552
|
$
|
(98
|
)
|
$
|
15,454
|
|||
Earnings
per share - basic
|
$
|
0.61
|
$
|
0.61
|
||||||
Earnings
per share - diluted
|
$
|
0.60
|
$
|
0.59
|
Year
ended December 31, 2005
|
||||||||||||||||
Historical
2005
|
Pro
forma impact NETI 2005
|
Pro
forma impact EUP 2005
|
Pro
forma impact FLA 2005
|
Pro
forma 2005
|
||||||||||||
Revenue
|
$
|
299,221
|
$
|
278
|
$
|
4,964
|
$
|
19,030
|
$
|
323,493
|
||||||
Net
income
|
$
|
18,709
|
$
|
6
|
$
|
128
|
$
|
836
|
$
|
19,679
|
||||||
Earnings
per share - basic
|
$
|
0.80
|
$
|
0.84
|
||||||||||||
Earnings
per share - diluted
|
$
|
0.76
|
$
|
0.80
|
Year
ended December 31, 2004
|
||||||||||
Historical
2004
|
Pro
forma impact SWC 2004
|
Pro
forma 2004
|
||||||||
Revenue
|
$
|
261,233
|
$
|
46
|
$
|
261,279
|
||||
Net
income
|
$
|
12,978
|
$
|
(145
|
)
|
$
|
12,833
|
|||
Earnings
per share - basic
|
$
|
0.60
|
$
|
0.59
|
||||||
Earnings
per share - diluted
|
$
|
0.56
|
$
|
0.56
|
6.
|
GOODWILL
AND OTHER INTANGIBLES
|
Goodwill
balance as of December 31, 2004
|
$
|
32,802
|
||
Goodwill
acquired pursuant to business acquisition-EUP
|
8,201
|
|||
Goodwill
acquired pursuant to business acquisition-NET
|
18,464
|
|||
Goodwill
balance as of December 31, 2005
|
59,467
|
|||
Goodwill
acquired pursuant to business acquisition-FLA
|
24,710
|
|||
Goodwill
adjustments
|
818
|
|||
Goodwill
balance as of December 31, 2006
|
$
|
84,995
|
At
December 31, 2006
|
At
December 31, 2005
|
|||||||||||||||
Weighted
Average Amortization Period (years)
|
Gross
Carrying Amount
|
Accumulated
Amortization
|
Gross
Carrying Amount
|
Accumulated
Amortization
|
||||||||||||
Student
contracts
|
1
|
$
|
2,200
|
$
|
2,010
|
$
|
1,920
|
$
|
1,569
|
|||||||
Trade
name
|
Indefinite
|
1,270
|
-
|
1,410
|
-
|
|||||||||||
Curriculum
|
10
|
700
|
138
|
1,400
|
74
|
|||||||||||
Non-compete
|
5
|
201
|
25
|
1
|
1
|
|||||||||||
Total
|
$
|
4,371
|
$
|
2,173
|
$
|
4,731
|
$
|
1,644
|
Year
Ending December 31,
|
||||
2007
|
$
|
300
|
||
2008
|
110
|
|||
2009
|
110
|
|||
2010
|
110
|
|||
2011
|
86
|
|||
Thereafter
|
212
|
|||
$
|
927
|
7.
|
PROPERTY,
EQUIPMENT AND FACILITIES
|
Useful
life (years)
|
At
December 31,
|
|||||||||
2006
|
2005
|
|||||||||
Land
|
-
|
$
|
13,563
|
$
|
5,519
|
|||||
Buildings
and improvements
|
1-25
|
97,914
|
68,922
|
|||||||
Equipment,
furniture and fixtures
|
1-12
|
52,311
|
44,097
|
|||||||
Vehicles
|
1-7
|
1,915
|
1,853
|
|||||||
Construction
in progress
|
-
|
1,536
|
8,111
|
|||||||
167,239
|
128,502
|
|||||||||
Less
accumulated depreciation and amortization
|
(72,871
|
)
|
(59,570
|
)
|
||||||
$
|
94,368
|
$
|
68,932
|
8.
|
ACCRUED
EXPENSES
|
At
December 31,
|
|||||||
2006
|
2005
|
||||||
Accrued
compensation and benefits
|
$
|
6,255
|
$
|
7,393
|
|||
Other
accrued expenses
|
4,080
|
3,667
|
|||||
$
|
10,335
|
$
|
11,060
|
9.
|
LONG-TERM
DEBT AND LEASE OBLIGATIONS
|
At
December 31,
|
|||||||
2006
|
2005
|
||||||
Credit
agreement (a)
|
$
|
-
|
$
|
-
|
|||
Finance
obligation (b)
|
9,672
|
9,672
|
|||||
Automobile
loans
|
37
|
81
|
|||||
Capital
leases-computers (with rates ranging from 6.7% to 10.7%)
|
151
|
1,015
|
|||||
9,860
|
10,768
|
||||||
Less
current maturities
|
(91
|
)
|
(283
|
)
|
|||
$
|
9,769
|
$
|
10,485
|
Year
ending December 31,
|
||||
2007
|
$
|
91
|
||
2008
|
91
|
|||
2009
|
6
|
|||
2010
|
-
|
|||
2011
|
-
|
|||
Thereafter
|
9,672
|
|||
$
|
9,860
|
10.
|
RECOURSE
LOAN AGREEMENT
|
Disbursement
Year
|
Loans
Disbursed
|
Loans
We May be Required to Purchase (1)
|
|||||
2005
|
$
|
1,400
|
$
|
420
|
|||
2006
|
3,486
|
1,046
|
|||||
$
|
4,886
|
$
|
1,466
|
(1)
|
Represents
the maximum amount of loans under the agreement that we may be required
to
purchase in the future based on cumulative loans disbursed and
purchased.
|
11.
|
STOCKHOLDERS'
EQUITY
|
December
31,
|
|||
2006
|
2005
|
2004
|
|
Expected
volatility
|
55.10%
|
55.10-71.35%
|
59.79-80.35%
|
Expected
dividend yield
|
0%
|
0%
|
0%
|
Expected
life (term)
|
6
Years
|
4-8
Years
|
4-8.5
Years
|
Risk-free
interest rate
|
4.13-4.84%
|
3.59-4.29%
|
2.45-4.27%
|
Weighted-average
exercise price during the year
|
$17.00
|
$17.14
|
$23.88
|
Shares
|
Weighted
Average Exercise Price Per Share
|
Weighted
Average Remaining Contractual Term
|
Aggregate
intrinsic Value (in thousands)
|
||||||||||
Outstanding
December 31, 2003
|
2,155,595
|
$
|
5.22
|
||||||||||
Granted
|
128,500
|
23.88
|
|||||||||||
Cancelled
|
(230,425
|
)
|
9.49
|
||||||||||
Exercised
|
(31,175
|
)
|
3.10
|
||||||||||
Outstanding
December 31, 2004
|
2,022,495
|
5.92
|
|||||||||||
Granted
|
189,500
|
17.14
|
|||||||||||
Cancelled
|
(102,125
|
)
|
11.30
|
||||||||||
Exercised
|
(270,697
|
)
|
2.65
|
||||||||||
Outstanding
December 31, 2005
|
1,839,173
|
7.26
|
|||||||||||
Granted
|
256,000
|
17.00
|
|||||||||||
Cancelled
|
(103,072
|
)
|
13.98
|
||||||||||
Exercised
|
(263,876
|
)
|
3.56
|
$
|
3,444
|
||||||||
Outstanding
December 31, 2006
|
1,728,225
|
8.85
|
6.31
years
|
10,255
|
|||||||||
Exercisable
as of December 31, 2006
|
1,189,582
|
5.64
|
5.37
years
|
9,876
|
As
of December 31, 2006
|
||||||||||||||||
Stock
Options Outstanding
|
Stock
Options Exercisable
|
|||||||||||||||
Range
of Exercise Prices
|
Shares
|
Contractual
Weighted Average life (years)
|
Weighted
Average Price
|
Shares
|
Weighted
Exercise Price
|
|||||||||||
$1.55
|
50,898
|
2.47
|
$
|
1.55
|
50,898
|
$
|
1.55
|
|||||||||
$3.10
|
906,952
|
5.03
|
3.10
|
885,512
|
3.10
|
|||||||||||
$4.00-$13.99
|
38,500
|
6.34
|
5.81
|
17,300
|
5.43
|
|||||||||||
$14.00-$19.99
|
591,375
|
8.27
|
15.28
|
190,872
|
14.03
|
|||||||||||
$20.00-$25.00
|
140,500
|
7.75
|
22.41
|
45,000
|
23.01
|
|||||||||||
1,728,225
|
6.31
|
8.85
|
1,189,582
|
5.57
|
12.
|
PENSION
PLAN
|
Year
Ended December 31,
|
|||||||
2006
|
2005
|
||||||
CHANGES
IN BENEFIT OBLIGATIONS:
|
|||||||
Benefit
obligation-beginning of year
|
$
|
13,961
|
$
|
13,055
|
|||
Service
cost
|
110
|
104
|
|||||
Interest
cost
|
797
|
732
|
|||||
Actuarial
loss
|
218
|
710
|
|||||
Benefits
paid
|
(462
|
)
|
(640
|
)
|
|||
Benefit
obligation at end of year
|
14,624
|
13,961
|
|||||
CHANGE
IN PLAN ASSETS:
|
|||||||
Fair
value of plan assets-beginning of year
|
14,330
|
14,071
|
|||||
Actual
return on plan assets
|
1,663
|
649
|
|||||
Employer
contribution
|
200
|
250
|
|||||
Benefits
paid, including expenses
|
(462
|
)
|
(640
|
)
|
|||
Fair
value of plan assets-end of year
|
15,731
|
14,330
|
|||||
FAIR
VALUE IN EXCESS OF BENEFIT OBLIGATION FUNDED STATUS:
|
$
|
1,107
|
$
|
369
|
Year
Ended December 31,
|
|||||||
2006
|
2005
|
||||||
Noncurrent
assets
|
$
|
1,107
|
$
|
-
|
|||
Current
liabilities
|
-
|
-
|
|||||
Noncurrent
liabilities
|
-
|
-
|
|||||
$
|
1,107
|
$
|
-
|
Year
Ended December 31,
|
|||||||
2006
|
2005
|
||||||
Transition
asset/(obligation)
|
$
|
-
|
$
|
-
|
|||
Prior
service cost
|
-
|
-
|
|||||
Loss
|
(4,062
|
)
|
-
|
||||
$
|
(4,062
|
)
|
$
|
-
|
Balances
Before Adoption of Statement 158
|
Adjustments
|
Balances
After Adoption of Statement 158
|
||||||||
Pension
plan assets, net
|
$
|
5,169
|
$
|
(4,062
|
)
|
$
|
1,107
|
|||
Deferred
income taxes
|
1,037
|
1,651
|
2,688
|
|||||||
Accumulated
other comprehensive income
|
-
|
2,411
|
2,411
|
Year
Ended December 31,
|
|||||||
2006
|
2005
|
||||||
COMPONENTS
OF NET PERIODIC BENEFIT COST (INCOME)
|
|||||||
Service
cost
|
$
|
110
|
$
|
104
|
|||
Interest
cost
|
797
|
732
|
|||||
Expected
return on plan assets
|
(1,122
|
)
|
(1,101
|
)
|
|||
Amortization
of transition asset
|
-
|
(3
|
)
|
||||
Amortization
of prior service cost
|
1
|
1
|
|||||
Recognized
net actuarial loss
|
316
|
266
|
|||||
Net
periodic benefit cost (income)
|
$
|
102
|
$
|
(1
|
)
|
2006
|
2005
|
||||||
Equity
securities
|
49
|
%
|
48
|
%
|
|||
Fixed
income
|
36
|
%
|
39
|
%
|
|||
International
equities
|
14
|
%
|
12
|
%
|
|||
Cash
and equivalents
|
1
|
%
|
1
|
%
|
|||
Total
|
100
|
%
|
100
|
%
|
2006
|
2005
|
||||||
Discount
rate
|
5.82
|
%
|
5.75
|
%
|
|||
Rate
of compensation increase
|
4.00
|
%
|
4.00
|
%
|
2006
|
2005
|
||||||
Discount
rate
|
5.75
|
%
|
5.75
|
%
|
|||
Rate
of compensation increase
|
4.00
|
%
|
4.00
|
%
|
|||
Long-term
rate of return
|
8.00
|
%
|
8.00
|
%
|
Fiscal
Year Ending December 31,
|
||||
2007
|
$
|
645
|
||
2008
|
661
|
|||
2009
|
703
|
|||
2010
|
769
|
|||
2011
|
798
|
|||
Years
2012-2016
|
5,000
|
13.
|
INCOME
TAXES
|
Year
Ended December 31,
|
||||||||||
2006
|
2005
|
2004
|
||||||||
Current:
|
||||||||||
Federal
|
$
|
11,727
|
$
|
9,160
|
$
|
7,774
|
||||
State
|
2,935
|
2,427
|
1,797
|
|||||||
Total
|
14,662
|
11,587
|
9,571
|
|||||||
Deferred:
|
||||||||||
Federal
|
(2,908
|
)
|
75
|
(329
|
)
|
|||||
State
|
(747
|
)
|
265
|
-
|
||||||
Total
|
(3,655
|
)
|
340
|
(329
|
)
|
|||||
Total
provision
|
$
|
11,007
|
$
|
11,927
|
$
|
9,242
|
At
December 31,
|
|||||||
2006
|
2005
|
||||||
Deferred
tax assets
|
|||||||
Current:
|
|||||||
Accrued
vacation
|
$
|
94
|
$
|
81
|
|||
Allowance
for bad debts
|
4,683
|
3,084
|
|||||
Accrued
student fees
|
50
|
376
|
|||||
Other
|
-
|
4
|
|||||
Total
current deferred tax assets
|
4,827
|
3,545
|
|||||
Noncurrent:
|
|||||||
Accrued
rent
|
2,177
|
1,649
|
|||||
Stock-based
compensation
|
1,568
|
1,140
|
|||||
Depreciation
|
5,369
|
2,698
|
|||||
Other
intangibles
|
(3,177
|
)
|
487
|
||||
Net
operating loss carryforward
|
-
|
60
|
|||||
Sale
leaseback-deferred gain
|
1,889
|
1,769
|
|||||
Other
|
-
|
7
|
|||||
Total
noncurrent deferred tax assets
|
7,826
|
7,810
|
|||||
Deferred
tax liabilities
|
|||||||
Noncurrent:
|
|||||||
Goodwill
|
(4,687
|
)
|
(2,961
|
)
|
|||
Prepaid
pension cost
|
(451
|
)
|
(2,059
|
)
|
|||
Total
deferred tax liabilities
|
(5,138
|
)
|
(5,020
|
)
|
|||
Total
net noncurrent deferred tax assets
|
2,688
|
2,790
|
|||||
Total
net deferred tax assets
|
$
|
7,515
|
$
|
6,335
|
Year
Ended December 31,
|
|||||||||||||||||||
2006
|
2005
|
2004
|
|||||||||||||||||
Income
before taxes
|
$
|
26,559
|
$
|
30,636
|
$
|
22,220
|
|||||||||||||
Expected
tax
|
$
|
9,296
|
35.0
|
%
|
$
|
10,723
|
35.0
|
%
|
$
|
7,777
|
35.0
|
%
|
|||||||
State
tax expense (net of federal benefit)
|
1,507
|
5.7
|
1,750
|
5.7
|
1,168
|
5.3
|
|||||||||||||
Resolution
of tax contingency (a)
|
-
|
-
|
(785
|
)
|
(2.6
|
)
|
-
|
-
|
|||||||||||
Other
|
204
|
0.7
|
239
|
0.8
|
297
|
1.3
|
|||||||||||||
Total
|
$
|
11,007
|
41.4
|
%
|
$
|
11,927
|
38.9
|
%
|
$
|
9,242
|
41.6
|
%
|
14.
|
SEGMENT
REPORTING
|
15.
|
RELATED
PARTY TRANSACTIONS
|
16.
|
DERIVATIVE
INSTRUMENTS AND HEDGING
ACTIVITIES
|
17.
|
COMMITMENTS
AND CONTINGENCIES
|
Year
Ending December 31,
|
Finance
Obligations
|
Operating
Leases
|
Capital
Leases
|
|||||||
2007
|
$
|
1,334
|
$
|
17,085
|
$
|
101
|
||||
2008
|
1,334
|
16,264
|
95
|
|||||||
2009
|
1,334
|
14,126
|
7
|
|||||||
2010
|
1,334
|
12,570
|
-
|
|||||||
2011
|
1,334
|
11,916
|
-
|
|||||||
Thereafter
|
6,784
|
76,452
|
-
|
|||||||
13,454
|
148,413
|
203
|
||||||||
Less
amount representing interest
|
(13,454
|
)
|
-
|
(15
|
)
|
|||||
$
|
-
|
$
|
148,413
|
$
|
188
|
18.
|
UNAUDITED
QUARTERLY FINANCIAL
INFORMATION
|
Quarter
|
|||||||||||||
2006
|
First
|
Second
|
Third
|
Fourth
|
|||||||||
Net
revenues
|
$
|
75,513
|
$
|
75,363
|
$
|
84,505
|
$
|
86,125
|
|||||
Income
from operations
|
4,708
|
1,799
|
4,630
|
16,864
|
|||||||||
Net
income available to common stockholders
|
2,762
|
966
|
2,232
|
9,592
|
|||||||||
Income
per share:
|
|||||||||||||
Basic
|
$
|
0.11
|
$
|
0.04
|
$
|
0.09
|
$
|
0.38
|
|||||
Diluted
|
$
|
0.11
|
$
|
0.04
|
$
|
0.09
|
$
|
0.37
|
Quarter
|
|||||||||||||
2005
|
First
|
Second
|
Third
|
Fourth
|
|||||||||
Net
revenues
|
$
|
70,869
|
$
|
68,236
|
$
|
78,352
|
$
|
81,764
|
|||||
Income
from operations
|
2,501
|
812
|
7,898
|
21,299
|
|||||||||
Net
income available to common stockholders
|
772
|
42
|
5,485
|
12,410
|
|||||||||
Income
per share:
|
|||||||||||||
Basic
|
$
|
0.04
|
$
|
0.00
|
$
|
0.22
|
$
|
0.49
|
|||||
Diluted
|
$
|
0.03
|
$
|
0.00
|
$
|
0.21
|
$
|
0.48
|
Description
|
Balance
at Beginning of Period
|
Charged
to Expense
|
Amount
Written-off
|
Balance
at End of Period
|
|||||||||
Allowance
accounts for the year ended:
|
|||||||||||||
December
31, 2006
|
|||||||||||||
Student
receivable allowance
|
$
|
7,647
|
$
|
15,590
|
$
|
(11,701
|
)
|
$
|
11,536
|
||||
December
31, 2005
|
|||||||||||||
Student
receivable allowance
|
$
|
7,023
|
$
|
11,188
|
$
|
(10,564
|
)
|
$
|
7,647
|
||||
December
31, 2004
|
|||||||||||||
Student
receivable allowance
|
$
|
5,469
|
$
|
9,247
|
$
|
(7,693
|
)
|
$
|
7,023
|
1.
|
EFFECTIVENESS
OF AGREEMENT
|
2.
|
EMPLOYMENT
AND DUTIES
|
3.
|
COMPENSATION
|
4.
|
EMPLOYEE
BENEFITS
|
5.
|
TERMINATION
OF EMPLOYMENT
|
6.
|
EFFECT
OF A CHANGE IN CONTROL
|
7.
|
REDUCTION
OF PAYMENTS
|
8.
|
NO
ADDITIONAL RIGHTS
|
9.
|
RESTRICTIVE
COVENANTS
|
10.
|
ARBITRATION
|
11.
|
MISCELLANEOUS
|
LINCOLN
EDUCATIONAL SERVICES CORPORATION
|
||
By:
|
/s/
James J. Burke, Jr.
|
|
|
Name:
James J. Burke, Jr.
|
|
|
Title:
Chairman of Compensation Committee
|
|
EXECUTIVE
|
||
/s/
David F. Carney
|
||
David
F. Carney
|
(a)
|
prior
to a Change in Control, (i) the Executive’s willful failure to perform the
duties of his employment in any material respect, (ii) malfeasance
or
gross negligence in the performance of the Executive’s duties of
employment, (iii) the Executive’s conviction of a felony under the laws of
the United States or any state thereof (whether or not in connection
with
his employment), (iv) the Executive’s intentional or reckless disclosure
of protected information respecting any member of the Company Group’s
business to any individual or entity which is not in the performance
of
the duties of his employment, (v) the Executive’s commission of an act or
acts of sexual harassment that would normally constitute grounds
for
termination, or (vi) any other act or omission by the Executive
(other
than an act or omission resulting from the exercise by the Executive
of
good faith business judgment), which is materially injurious to
the
financial condition or business reputation of any member of the
Company
Group; provided,
however,
that in the case of (i) and (ii) above, the Executive shall not
be deemed
to have been terminated for cause unless he has received written
notice of
the alleged basis therefor from the Company, and fails to remedy
the
matter within 30 days after he has received such notice, except
that no
such “cure opportunity” shall be required in the case of two separate
episodes occurring within any 12-month period that give the Company
the
right to terminate for cause for such reason;
or
|
(b)
|
on
or after a Change in Control, (i) the Executive’s willful failure to
perform the duties of his employment in any material respect, (ii)
malfeasance or gross negligence in the performance of the Executive’s
duties of employment, (iii) the Executive’s conviction of a felony under
the laws of the United States or any state thereof (whether or
not in
connection with his employment), (iv) the Executive’s intentional or
reckless disclosure of protected information respecting any member
of the
Company Group’s business to any individual or entity which is not in the
performance of the duties of his employment; provided,
however,
that in the case of (i) and (ii) above, the Executive shall not
be deemed
to have been terminated for cause unless he has received written
notice of
the alleged basis therefor from the Company, and fails to remedy
the
matter within 30 days after he has received such notice, except
that no
such “cure opportunity” shall be required in the case of two separate
episodes occurring within any 12-month period that give the Company
the
right to terminate for cause for such
reason.
|
(a)
|
when
a “person” (as defined in Section 3(a)(9) of the Exchange Act), including
a “group” (as defined in Section 13(d) and 14(d) of the Exchange Act),
either directly or indirectly becomes the “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act) of 25% or more of either
(1) the
then outstanding Common Stock, or (2) the combined voting power
of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors; provided,
however,
that
the following acquisitions shall not constitute a Change in Control:
(1)
any acquisition directly from the Company; (2) any acquisition
by the
Company; or (3) any acquisition by an employee benefit plan (or
related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company;
|
(b)
|
when,
during any period of 24 consecutive months during the Employment
Period,
the individuals who, at the beginning of such period, constitute
the Board
(the “Company
Incumbent Directors”)
cease for any reason other than death to constitute at least a
majority
thereof; provided,
however,
that a director who was not a director at the beginning of such
24-month
period shall be deemed to be a Company Incumbent Director if such
director
was elected by, or on the recommendation of or with the approval
of at
least two-thirds of the directors of the Company, who then qualified
as
Company Incumbent Directors;
|
(c)
|
when
the stockholders of the Company approve a reorganization, merger
or
consolidation of the Company without the consent or approval of
a majority
of the Company Incumbent Directors;
|
(d)
|
consummation
of a merger, amalgamation or consolidation of the Company with
any other
corporation, the issuance of voting securities of the Company in
connection with a merger, amalgamation or consolidation of the
Company or
sale or other disposition of all or substantially all of the assets
of the
Company or the acquisition of assets of another corporation (each,
a
“Business
Combination”),
unless, in each case of a Business Combination, immediately following
such
Business Combination, all or substantially all of the individuals
and
entities who were the beneficial owners of the Common Stock outstanding
immediately prior to such Business Combination beneficially own,
directly
or indirectly, more than 50% of the then outstanding shares of
common
stock and 50% of the combined voting power of the then outstanding
voting
securities entitled to vote generally in the election of directors,
as the
case may be, of the entity resulting from such Business Combination
(including, without limitation, an entity which as a result of
such
transaction owns the Company or all or substantially all of the
Company’s
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately
prior
to such Business Combination, of the Common Stock;
or
|
(e)
|
a
complete liquidation or dissolution of the Company or the sale
or other
disposition of all or substantially all of the assets of the
Company;
|
1.
|
EFFECTIVENESS
OF AGREEMENT
|
2.
|
EMPLOYMENT
AND DUTIES
|
3.
|
COMPENSATION
|
4.
|
EMPLOYEE
BENEFITS
|
5.
|
TERMINATION
OF EMPLOYMENT
|
6.
|
EFFECT
OF A CHANGE IN CONTROL
|
7.
|
REDUCTION
OF PAYMENTS
|
8.
|
NO
ADDITIONAL RIGHTS
|
9.
|
RESTRICTIVE
COVENANTS
|
10.
|
ARBITRATION
|
11.
|
MISCELLANEOUS
|
LINCOLN
EDUCATIONAL SERVICES CORPORATION
|
||
By:
|
/s/
David F. Carney
|
|
|
Name:
David F. Carney
|
|
|
Title:
Chairman & CEO
|
|
EXECUTIVE
|
||
/s/
Lawrence E. Brown
|
||
Lawrence
E. Brown
|
(a)
|
prior
to a Change in Control, (i) the Executive’s willful failure to perform the
duties of his employment in any material respect, (ii) malfeasance
or
gross negligence in the performance of the Executive’s duties of
employment, (iii) the Executive’s conviction of a felony under the laws of
the United States or any state thereof (whether or not in connection
with
his employment), (iv) the Executive’s intentional or reckless disclosure
of protected information respecting any member of the Company Group’s
business to any individual or entity which is not in the performance
of
the duties of his employment, (v) the Executive’s commission of an act or
acts of sexual harassment that would normally constitute grounds
for
termination, or (vi) any other act or omission by the Executive
(other
than an act or omission resulting from the exercise by the Executive
of
good faith business judgment), which is materially injurious to
the
financial condition or business reputation of any member of the
Company
Group; provided,
however,
that in the case of (i) and (ii) above, the Executive shall not
be deemed
to have been terminated for cause unless he has received written
notice of
the alleged basis therefor from the Company, and fails to remedy
the
matter within 30 days after he has received such notice, except
that no
such “cure opportunity” shall be required in the case of two separate
episodes occurring within any 12-month period that give the Company
the
right to terminate for cause for such reason;
or
|
(b)
|
on
or after a Change in Control, (i) the Executive’s willful failure to
perform the duties of his employment in any material respect, (ii)
malfeasance or gross negligence in the performance of the Executive’s
duties of employment, (iii) the Executive’s conviction of a felony under
the laws of the United States or any state thereof (whether or
not in
connection with his employment), (iv) the Executive’s intentional or
reckless disclosure of protected information respecting any member
of the
Company Group’s business to any individual or entity which is not in the
performance of the duties of his employment; provided,
however,
that in the case of (i) and (ii) above, the Executive shall not
be deemed
to have been terminated for cause unless he has received written
notice of
the alleged basis therefor from the Company, and fails to remedy
the
matter within 30 days after he has received such notice, except
that no
such “cure opportunity” shall be required in the case of two separate
episodes occurring within any 12-month period that give the Company
the
right to terminate for cause for such
reason.
|
(a)
|
when
a “person” (as defined in Section 3(a)(9) of the Exchange Act), including
a “group” (as defined in Section 13(d) and 14(d) of the Exchange Act),
either directly or indirectly becomes the “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act) of 25% or more of either
(1) the
then outstanding Common Stock, or (2) the combined voting power
of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors; provided,
however,
that
the following acquisitions shall not constitute a Change in Control:
(1)
any acquisition directly from the Company; (2) any acquisition
by the
Company; or (3) any acquisition by an employee benefit plan (or
related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company;
|
(b)
|
when,
during any period of 24 consecutive months during the Employment
Period,
the individuals who, at the beginning of such period, constitute
the Board
(the “Company
Incumbent Directors”)
cease for any reason other than death to constitute at least a
majority
thereof; provided,
however,
that a director who was not a director at the beginning of such
24-month
period shall be deemed to be a Company Incumbent Director if such
director
was elected by, or on the recommendation of or with the approval
of at
least two-thirds of the directors of the Company, who then qualified
as
Company Incumbent Directors;
|
(c)
|
when
the stockholders of the Company approve a reorganization, merger
or
consolidation of the Company without the consent or approval of
a majority
of the Company Incumbent Directors;
|
(d)
|
consummation
of a merger, amalgamation or consolidation of the Company with
any other
corporation, the issuance of voting securities of the Company in
connection with a merger, amalgamation or consolidation of the
Company or
sale or other disposition of all or substantially all of the assets
of the
Company or the acquisition of assets of another corporation (each,
a
“Business
Combination”),
unless, in each case of a Business Combination, immediately following
such
Business Combination, all or substantially all of the individuals
and
entities who were the beneficial owners of the Common Stock outstanding
immediately prior to such Business Combination beneficially own,
directly
or indirectly, more than 50% of the then outstanding shares of
common
stock and 50% of the combined voting power of the then outstanding
voting
securities entitled to vote generally in the election of directors,
as the
case may be, of the entity resulting from such Business Combination
(including, without limitation, an entity which as a result of
such
transaction owns the Company or all or substantially all of the
Company’s
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately
prior
to such Business Combination, of the Common Stock;
or
|
(e)
|
a
complete liquidation or dissolution of the Company or the sale
or other
disposition of all or substantially all of the assets of the
Company;
|
1.
|
EFFECTIVENESS
OF AGREEMENT
|
2.
|
EMPLOYMENT
AND DUTIES
|
3.
|
COMPENSATION
|
4.
|
EMPLOYEE
BENEFITS
|
5.
|
TERMINATION
OF EMPLOYMENT
|
6.
|
EFFECT
OF A CHANGE IN CONTROL
|
7.
|
REDUCTION
OF PAYMENTS
|
8.
|
NO
ADDITIONAL RIGHTS
|
9.
|
RESTRICTIVE
COVENANTS
|
10.
|
ARBITRATION
|
11.
|
MISCELLANEOUS
|
LINCOLN
EDUCATIONAL SERVICES CORPORATION
|
||
By:
|
/s/
David F. Carney
|
|
Name:
David F. Carney
|
||
Title:
Chairman & CEO
|
||
EXECUTIVE
|
||
/s/
Scott M. Shaw
|
||
Scott
M. Shaw
|
(a)
|
prior
to a Change in Control, (i) the Executive’s willful failure to perform the
duties of his employment in any material respect, (ii) malfeasance
or
gross negligence in the performance of the Executive’s duties of
employment, (iii) the Executive’s conviction of a felony under the laws of
the United States or any state thereof (whether or not in connection
with
his employment), (iv) the Executive’s intentional or reckless disclosure
of protected information respecting any member of the Company Group’s
business to any individual or entity which is not in the performance
of
the duties of his employment, (v) the Executive’s commission of an act or
acts of sexual harassment that would normally constitute grounds
for
termination, or (vi) any other act or omission by the Executive
(other
than an act or omission resulting from the exercise by the Executive
of
good faith business judgment), which is materially injurious to
the
financial condition or business reputation of any member of the
Company
Group; provided,
however,
that in the case of (i) and (ii) above, the Executive shall not
be deemed
to have been terminated for cause unless he has received written
notice of
the alleged basis therefor from the Company, and fails to remedy
the
matter within 30 days after he has received such notice, except
that no
such “cure opportunity” shall be required in the case of two separate
episodes occurring within any 12-month period that give the Company
the
right to terminate for cause for such reason;
or
|
(b)
|
on
or after a Change in Control, (i) the Executive’s willful failure to
perform the duties of his employment in any material respect, (ii)
malfeasance or gross negligence in the performance of the Executive’s
duties of employment, (iii) the Executive’s conviction of a felony under
the laws of the United States or any state thereof (whether or
not in
connection with his employment), (iv) the Executive’s intentional or
reckless disclosure of protected information respecting any member
of the
Company Group’s business to any individual or entity which is not in the
performance of the duties of his employment; provided,
however,
that in the case of (i) and (ii) above, the Executive shall not
be deemed
to have been terminated for cause unless he has received written
notice of
the alleged basis therefor from the Company, and fails to remedy
the
matter within 30 days after he has received such notice, except
that no
such “cure opportunity” shall be required in the case of two separate
episodes occurring within any 12-month period that give the Company
the
right to terminate for cause for such
reason.
|
(a)
|
when
a “person” (as defined in Section 3(a)(9) of the Exchange Act), including
a “group” (as defined in Section 13(d) and 14(d) of the Exchange Act),
either directly or indirectly becomes the “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act) of 25% or more of either
(1) the
then outstanding Common Stock, or (2) the combined voting power
of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors; provided,
however,
that
the following acquisitions shall not constitute a Change in Control:
(1)
any acquisition directly from the Company; (2) any acquisition
by the
Company; or (3) any acquisition by an employee benefit plan (or
related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company;
|
(b)
|
when,
during any period of 24 consecutive months during the Employment
Period,
the individuals who, at the beginning of such period, constitute
the Board
(the “Company
Incumbent Directors”)
cease for any reason other than death to constitute at least a
majority
thereof; provided,
however,
that a director who was not a director at the beginning of such
24-month
period shall be deemed to be a Company Incumbent Director if such
director
was elected by, or on the recommendation of or with the approval
of at
least two-thirds of the directors of the Company, who then qualified
as
Company Incumbent Directors;
|
(c)
|
when
the stockholders of the Company approve a reorganization, merger
or
consolidation of the Company without the consent or approval of
a majority
of the Company Incumbent Directors;
|
(d)
|
consummation
of a merger, amalgamation or consolidation of the Company with
any other
corporation, the issuance of voting securities of the Company in
connection with a merger, amalgamation or consolidation of the
Company or
sale or other disposition of all or substantially all of the assets
of the
Company or the acquisition of assets of another corporation (each,
a
“Business
Combination”),
unless, in each case of a Business Combination, immediately following
such
Business Combination, all or substantially all of the individuals
and
entities who were the beneficial owners of the Common Stock outstanding
immediately prior to such Business Combination beneficially own,
directly
or indirectly, more than 50% of the then outstanding shares of
common
stock and 50% of the combined voting power of the then outstanding
voting
securities entitled to vote generally in the election of directors,
as the
case may be, of the entity resulting from such Business Combination
(including, without limitation, an entity which as a result of
such
transaction owns the Company or all or substantially all of the
Company’s
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately
prior
to such Business Combination, of the Common Stock;
or
|
(e)
|
a
complete liquidation or dissolution of the Company or the sale
or other
disposition of all or substantially all of the assets of the
Company;
|
1.
|
EFFECTIVENESS
OF AGREEMENT
|
2.
|
EMPLOYMENT
AND DUTIES
|
3.
|
COMPENSATION
|
4.
|
EMPLOYEE
BENEFITS
|
5.
|
TERMINATION
OF EMPLOYMENT
|
6.
|
EFFECT
OF A CHANGE IN CONTROL
|
7.
|
REDUCTION
OF PAYMENTS
|
8.
|
NO
ADDITIONAL RIGHTS
|
9.
|
RESTRICTIVE
COVENANTS
|
10.
|
ARBITRATION
|
11.
|
MISCELLANEOUS
|
LINCOLN
EDUCATIONAL SERVICES CORPORATION
|
||
By:
|
/s/
David F. Carney
|
|
Name:
David F. Carney
|
||
Title:
Chairman & CEO
|
||
EXECUTIVE
|
||
/s/
Cesar Ribeiro
|
||
Cesar
Ribeiro
|
(a)
|
prior
to a Change in Control, (i) the Executive’s willful failure to perform the
duties of his employment in any material respect, (ii) malfeasance
or
gross negligence in the performance of the Executive’s duties of
employment, (iii) the Executive’s conviction of a felony under the laws of
the United States or any state thereof (whether or not in connection
with
his employment), (iv) the Executive’s intentional or reckless disclosure
of protected information respecting any member of the Company Group’s
business to any individual or entity which is not in the performance
of
the duties of his employment, (v) the Executive’s commission of an act or
acts of sexual harassment that would normally constitute grounds
for
termination, or (vi) any other act or omission by the Executive
(other
than an act or omission resulting from the exercise by the Executive
of
good faith business judgment), which is materially injurious to
the
financial condition or business reputation of any member of the
Company
Group; provided,
however,
that in the case of (i) and (ii) above, the Executive shall not
be deemed
to have been terminated for cause unless he has received written
notice of
the alleged basis therefor from the Company, and fails to remedy
the
matter within 30 days after he has received such notice, except
that no
such “cure opportunity” shall be required in the case of two separate
episodes occurring within any 12-month period that give the Company
the
right to terminate for cause for such reason;
or
|
(b)
|
on
or after a Change in Control, (i) the Executive’s willful failure to
perform the duties of his employment in any material respect, (ii)
malfeasance or gross negligence in the performance of the Executive’s
duties of employment, (iii) the Executive’s conviction of a felony under
the laws of the United States or any state thereof (whether or
not in
connection with his employment), (iv) the Executive’s intentional or
reckless disclosure of protected information respecting any member
of the
Company Group’s business to any individual or entity which is not in the
performance of the duties of his employment; provided,
however,
that in the case of (i) and (ii) above, the Executive shall not
be deemed
to have been terminated for cause unless he has received written
notice of
the alleged basis therefor from the Company, and fails to remedy
the
matter within 30 days after he has received such notice, except
that no
such “cure opportunity” shall be required in the case of two separate
episodes occurring within any 12-month period that give the Company
the
right to terminate for cause for such
reason.
|
(a)
|
when
a “person” (as defined in Section 3(a)(9) of the Exchange Act), including
a “group” (as defined in Section 13(d) and 14(d) of the Exchange Act),
either directly or indirectly becomes the “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act) of 25% or more of either
(1) the
then outstanding Common Stock, or (2) the combined voting power
of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors; provided,
however,
that
the following acquisitions shall not constitute a Change in Control:
(1)
any acquisition directly from the Company; (2) any acquisition
by the
Company; or (3) any acquisition by an employee benefit plan (or
related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company;
|
(b)
|
when,
during any period of 24 consecutive months during the Employment
Period,
the individuals who, at the beginning of such period, constitute
the Board
(the “Company
Incumbent Directors”)
cease for any reason other than death to constitute at least a
majority
thereof; provided,
however,
that a director who was not a director at the beginning of such
24-month
period shall be deemed to be a Company Incumbent Director if such
director
was elected by, or on the recommendation of or with the approval
of at
least two-thirds of the directors of the Company, who then qualified
as
Company Incumbent Directors;
|
(c)
|
when
the stockholders of the Company approve a reorganization, merger
or
consolidation of the Company without the consent or approval of
a majority
of the Company Incumbent Directors;
|
(d)
|
consummation
of a merger, amalgamation or consolidation of the Company with
any other
corporation, the issuance of voting securities of the Company in
connection with a merger, amalgamation or consolidation of the
Company or
sale or other disposition of all or substantially all of the assets
of the
Company or the acquisition of assets of another corporation (each,
a
“Business
Combination”),
unless, in each case of a Business Combination, immediately following
such
Business Combination, all or substantially all of the individuals
and
entities who were the beneficial owners of the Common Stock outstanding
immediately prior to such Business Combination beneficially own,
directly
or indirectly, more than 50% of the then outstanding shares of
common
stock and 50% of the combined voting power of the then outstanding
voting
securities entitled to vote generally in the election of directors,
as the
case may be, of the entity resulting from such Business Combination
(including, without limitation, an entity which as a result of
such
transaction owns the Company or all or substantially all of the
Company’s
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately
prior
to such Business Combination, of the Common Stock;
or
|
(e)
|
a
complete liquidation or dissolution of the Company or the sale
or other
disposition of all or substantially all of the assets of the
Company;
|
1.
|
EFFECTIVENESS
OF AGREEMENT
|
2.
|
EMPLOYMENT
AND DUTIES
|
3.
|
COMPENSATION
|
4.
|
EMPLOYEE
BENEFITS
|
5.
|
TERMINATION
OF EMPLOYMENT
|
6.
|
EFFECT
OF A CHANGE IN CONTROL
|
7.
|
REDUCTION
OF PAYMENTS
|
8.
|
NO
ADDITIONAL RIGHTS
|
9.
|
RESTRICTIVE
COVENANTS
|
10.
|
ARBITRATION
|
11.
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MISCELLANEOUS
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LINCOLN
EDUCATIONAL SERVICES CORPORATION
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By:
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/s/
David F. Carney
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Name:
David F. Carney
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Title:
Chairman & CEO
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EXECUTIVE
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/s/
Shaun E. McAlmont
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Shaun
E. McAlmont
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(a)
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prior
to a Change in Control, (i) the Executive’s willful failure to perform the
duties of his employment in any material respect, (ii) malfeasance
or
gross negligence in the performance of the Executive’s duties of
employment, (iii) the Executive’s conviction of a felony under the laws of
the United States or any state thereof (whether or not in connection
with
his employment), (iv) the Executive’s intentional or reckless disclosure
of protected information respecting any member of the Company Group’s
business to any individual or entity which is not in the performance
of
the duties of his employment, (v) the Executive’s commission of an act or
acts of sexual harassment that would normally constitute grounds
for
termination, or (vi) any other act or omission by the Executive
(other
than an act or omission resulting from the exercise by the Executive
of
good faith business judgment), which is materially injurious to
the
financial condition or business reputation of any member of the
Company
Group; provided,
however,
that in the case of (i) and (ii) above, the Executive shall not
be deemed
to have been terminated for cause unless he has received written
notice of
the alleged basis therefor from the Company, and fails to remedy
the
matter within 30 days after he has received such notice, except
that no
such “cure opportunity” shall be required in the case of two separate
episodes occurring within any 12-month period that give the Company
the
right to terminate for cause for such reason;
or
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(b)
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on
or after a Change in Control, (i) the Executive’s willful failure to
perform the duties of his employment in any material respect, (ii)
malfeasance or gross negligence in the performance of the Executive’s
duties of employment, (iii) the Executive’s conviction of a felony under
the laws of the United States or any state thereof (whether or
not in
connection with his employment), (iv) the Executive’s intentional or
reckless disclosure of protected information respecting any member
of the
Company Group’s business to any individual or entity which is not in the
performance of the duties of his employment; provided,
however,
that in the case of (i) and (ii) above, the Executive shall not
be deemed
to have been terminated for cause unless he has received written
notice of
the alleged basis therefor from the Company, and fails to remedy
the
matter within 30 days after he has received such notice, except
that no
such “cure opportunity” shall be required in the case of two separate
episodes occurring within any 12-month period that give the Company
the
right to terminate for cause for such
reason.
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(a)
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when
a “person” (as defined in Section 3(a)(9) of the Exchange Act), including
a “group” (as defined in Section 13(d) and 14(d) of the Exchange Act),
either directly or indirectly becomes the “beneficial owner” (as defined
in Rule 13d-3 under the Exchange Act) of 25% or more of either
(1) the
then outstanding Common Stock, or (2) the combined voting power
of the
then outstanding voting securities of the Company entitled to vote
generally in the election of directors; provided,
however,
that
the following acquisitions shall not constitute a Change in Control:
(1)
any acquisition directly from the Company; (2) any acquisition
by the
Company; or (3) any acquisition by an employee benefit plan (or
related
trust) sponsored or maintained by the Company or any corporation
controlled by the Company;
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(b)
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when,
during any period of 24 consecutive months during the Employment
Period,
the individuals who, at the beginning of such period, constitute
the Board
(the “Company
Incumbent Directors”)
cease for any reason other than death to constitute at least a
majority
thereof; provided,
however,
that a director who was not a director at the beginning of such
24-month
period shall be deemed to be a Company Incumbent Director if such
director
was elected by, or on the recommendation of or with the approval
of at
least two-thirds of the directors of the Company, who then qualified
as
Company Incumbent Directors;
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(c)
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when
the stockholders of the Company approve a reorganization, merger
or
consolidation of the Company without the consent or approval of
a majority
of the Company Incumbent Directors;
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(d)
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consummation
of a merger, amalgamation or consolidation of the Company with
any other
corporation, the issuance of voting securities of the Company in
connection with a merger, amalgamation or consolidation of the
Company or
sale or other disposition of all or substantially all of the assets
of the
Company or the acquisition of assets of another corporation (each,
a
“Business
Combination”),
unless, in each case of a Business Combination, immediately following
such
Business Combination, all or substantially all of the individuals
and
entities who were the beneficial owners of the Common Stock outstanding
immediately prior to such Business Combination beneficially own,
directly
or indirectly, more than 50% of the then outstanding shares of
common
stock and 50% of the combined voting power of the then outstanding
voting
securities entitled to vote generally in the election of directors,
as the
case may be, of the entity resulting from such Business Combination
(including, without limitation, an entity which as a result of
such
transaction owns the Company or all or substantially all of the
Company’s
assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately
prior
to such Business Combination, of the Common Stock;
or
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(e)
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a
complete liquidation or dissolution of the Company or the sale
or other
disposition of all or substantially all of the assets of the
Company;
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Name
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Jurisdiction
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Lincoln
Technical Institute, Inc. (wholly owned)
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New
Jersey
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New
England Acquisition LLC (wholly owned)
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Delaware
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Southwestern
Acquisition LLC (wholly owned)
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Delaware
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Nashville
Acquisition, LLC (wholly owned through Lincoln Technical Institute,
Inc.)
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Delaware
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Euphoria
Acquisition, LLC (wholly owned through Lincoln Technical Institute,
Inc.)
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Delaware
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New
England Institute of Technology at Palm Beach, Inc. (wholly owned
through
Lincoln Technical Institute, Inc.)
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Florida
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Florida
Acquisition, LLC (wholly owned)
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Delaware
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ComTech
Services Group Inc. (wholly owned through Lincoln Technical Institute,
Inc.)
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New
Jersey
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1.
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I
have reviewed this annual report on Form 10-K of Lincoln Educational
Services Corporation;
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2.
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Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such
statements
were made, not misleading with respect to the period covered by
this
report;
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3.
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Based
on my knowledge, the financial statements, and other financial
information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
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4.
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The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures
(as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
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5.
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The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
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Date:
March 16, 2007
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/s/
David F. Carney
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David
F. Carney
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Chairman
& Chief Executive Officer
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1.
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I
have reviewed this annual report on Form 10-K of Lincoln Educational
Services Corporation;
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2.
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Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such
statements
were made, not misleading with respect to the period covered by
this
report;
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3.
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Based
on my knowledge, the financial statements, and other financial
information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
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4.
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The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures
(as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and
have:
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5.
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The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
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Date:
March 16, 2007
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/s/
Cesar Ribeiro
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Cesar
Ribeiro
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Chief
Financial Officer
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/s/
David F. Carney
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David
F. Carney
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Chairman
& Chief Executive Officer
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/s/
Cesar Ribeiro
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Cesar
Ribeiro
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Chief
Financial Officer
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